India closing gap with China on MSCI index, aiming for $3bn inflows

India is on verge of closing in on China according to the analysis of MSCI index. This is an outcome of the country’s MSCI Global Standard Index scaling a record high even as China’s weightage falls, which in turn could result in nearly $3 billion flowing into the Indian equity markets.

MSCI, or Morgan Stanley Capital International, is an investment research company that provides stock index data, governance mechanisms and performance analytics to institutional investors and hedge fund firms. The company, a global index aggregator, is known to keep track of emerging market stocks.

While China’s weightage on the MSCI index will drop from 24.8 per cent to 24.2 per cent, India’s weight is expected to surge to more than 20 per cent by November end. Changes in index weight will take place once the markets close on August 30, 2024.

According to estimates of the Mumbai-based financial services company Nuvama, India’s top private lender HDFC Bank, which is also the heaviest stock on NSE Nifty 50, will see a growth in weightage with inflows likely to reach $1.8 billion even as the cumulative inflows into India stand anywhere between $2.7 billion and $3 billion.

Other Indian stocks that are expected to see a surge in weightage on the MSCI index are Coal India, Bharti Airtel and Mphasis.

On the other hand, Adani Enterprises, Ambuja Cements, Maruti Suzuki India, Yes Bank, LTIMindtree and SRF are expected to witness a fall in weightage on the index.

According to press reports, around 25 new stocks could be included in the MSCI India Small Cap Index. Nuvama expects these new stocks to trigger inflows in the range of $3 million and $26 million.

The MSCI Emerging Markets Index could incorporate Oil India, Rail Vikas Nigam, Vodafone Idea, Oracle Financial Services, Dixon Technologies, Prestige Estates Project and Zydus Lifesciences. Bandhan Bank will be omitted.

The Squirrels had reported on August 13 that MSCI intended to remove restrictions on Adani Group stocks in its August 2024 index review. The freeze on adjustments to Adani Group securities was done by MSCI in February 2023.

“MSCI clarifies that starting from the August 2024 index review, MSCI will implement the index review changes, including changes in the number of shares (NOS), foreign inclusion factor (FIF), and domestic inclusion factor (DIF) of Adani Group and associated securities that have been previously postponed,” a statement issued by the New York-based index aggregator had declared.