The MSCI standard index underwent its rebalancing exercise on Tuesday, August 26, resulting in significant changes that are expected to trigger substantial inflows and outflows for several stocks. Four new entrants to the index are poised to receive a cumulative inflow of approximately $1 billion, while some existing constituents face exclusion or weightage adjustments.

New Inclusions

Swiggy

• Expected inflows: $293 million
• Current trading price: ₹421.00
• Performance: Trading above its IPO price of ₹390.00

Vishal Mega Mart

• Expected inflows: $256 million
• Current trading price: ₹146.00
• Performance: Nearly 90% gains from its IPO price of ₹78.00

Waaree Energies India

• Expected inflows: $230 million
• Current trading price: ₹3,178.00
• Performance: Down 15% from its record high of ₹3,743.00

Hitachi Energy India

• Expected inflows: $233 million
• Performance: 25% gain

Exclusions and Weightage Changes

Exclusions

• Sona BLW: Expected outflows of $165 million
• Thermax: Expected outflows of $117 million

Increased Weightage

• CG Power: Expected inflows of $56 million due to increased weightage

Reduced Weightage

• Eternal: Expected outflows of $571 million
• Asian Paints: Expected outflows of $102 million

The MSCI rebalancing exercise is a significant event for the Indian stock market, potentially influencing trading patterns and stock prices. Investors and market participants closely watch these changes as they can lead to substantial fund flows and impact the liquidity of the affected stocks.

The inclusion of four new stocks in the MSCI standard index highlights the growing interest in India's diverse business landscape. Swiggy, a prominent player in the food delivery sector, and Vishal Mega Mart, a retail chain, represent the consumer-focused segments. Waaree Energies India's inclusion reflects the increasing importance of the renewable energy sector, while Hitachi Energy India represents the industrial and energy infrastructure segment.

It's worth noting that while some stocks like Vishal Mega Mart have seen significant gains since their IPO, others like Waaree Energies India are currently trading below their recent highs. These price movements underscore the dynamic nature of the market and the varying performance of different sectors.

The exclusions and weightage changes also present interesting insights. The outflows expected for companies like Sona BLW, Thermax, Eternal, and Asian Paints may lead to short-term pressure on their stock prices. Conversely, CG Power's increased weightage and expected inflows could potentially support its stock price.

As always, investors are advised to conduct their own research and consider their investment objectives before making any decisions based on index rebalancing events. While inclusion in or exclusion from an index can impact a stock's trading volume and price in the short term, long-term performance depends on various factors including company fundamentals and broader market conditions.

Nuvama Alternative & Quantitative Research has forecasted significant changes in the MSCI Standard Index for an upcoming rebalancing. The research firm anticipates the inclusion of four companies and the exclusion of two, potentially triggering substantial passive fund flows.

Expected Inclusions

Four companies are projected to join the MSCI Standard Index:

1. Vishal Mega Mart
2. Swiggy
3. Hitachi Energy
4. Waaree Energies

These inclusions are expected to generate considerable passive inflows:

Anticipated Exclusions

Two companies are likely to be removed from the index:

1. Sona BLW Precision Forgings
2. Thermax

The exclusions are projected to result in outflows of $186.00 million and $154.00 million for Sona BLW Precision Forgings and Thermax, respectively.

MSCI Smallcap Index Changes

The MSCI Smallcap Index is also expected to see movements:

• Twelve companies, including Inventurus Knowledge, Capri Global Capital, and Brainbees Solutions, are anticipated to join the index. This could lead to combined inflows of approximately $65.00 million.
• Four companies are set to be excluded from the smallcap index, potentially resulting in outflows totaling $36.00 million.

Special Note on Paytm

One 97 Communications (Paytm) has qualified for inclusion in the MSCI Standard Index. However, its entry is likely to be deferred to a future review. If included, Paytm could see potential inflows estimated at $270.00 million.

Timeline

• MSCI is expected to announce these changes in the future.
• The adjustments are scheduled to take effect following the announcement.

These projected changes in the MSCI indices could significantly impact the involved stocks and may lead to increased trading activity as index-tracking funds adjust their portfolios to reflect the new compositions.