MSCI Global Standard Index Review
For the August Global Standard Index review, which will take effect on September 1, 2023, MSCI released their list of stocks. Power Finance Corporation (PFC), Rural Electrification Corporation (REC), Astral, and Ashok Leyland are notable additions.
Nuvama Alternative and Quantitative Research predicts inflows of $203 million and $153 million for PFC and HDFC AMC, respectively.
| Stocks | Potential inflows |
| IDFC First Bank | $ 204 million |
| Ashok Layland | $196 million |
| PFC | $203 million |
| REC | $184 Million |
| Cummins India | $173 Million |
| Supreme Industries | $171 Million |
| Astral | $170 Million |
| HDFC AMC | $153 Million |
According to their estimations, Ashok Leyland, Cummins India, and Astral will each receive inflows of $196 million, $173 million, and $170 million, respectively, while IDFC First Bank is anticipated to receive inflows of $204 million.
According to the Nuvama research report, the absence of ACC from the index is expected to cause outflows of almost $92 million.
The Global Standard Index now includes Supreme Industries, IDFC First Bank, and HDFC Asset Management Company (AMC).
As part of its quarterly review, global index aggregator MSCI has added 8 stocks and removed 1 from the Global Standard Index.
Eight new equities, including Power Finance Corporation (PFC), REC, HDFC Asset Management Company (AMC), IDFC First Bank, Astral, and Cummins, have been included in the index while ACC has been excluded. India, Supreme Industries, and Ashok Leyland.
“The inclusion of REC and Supreme Industries in the index surprised trading firm Nuvama Alternative and Quantitative Research because they were strong contenders for the November 2023 review.
The firm estimates that this inclusion will result in inflows of $203 million and $153 million for PFC and HDFC AMC, respectively.
Similar inflows are anticipated for IDFC First Bank, Ashok Leyland, Cummins India, and Astral, totaling $204 million, $196 million, $173 million, and $170 million, respectively, according to the research.
On the other hand, according to Nuvama, the removal of ACC from the index is anticipated to cause outflows of $92 million.
Additionally, the report stated that the aforementioned stocks were chosen using the NOC method, with India earning six NOC spots, the most in recent memory.
The MSCI Global Smallcap Index, meanwhile, added 40 stocks while eliminating 11. India has added the most stocks to this index among countries in the Asia Pacific region.
With effect from August 31, 40 stocks will be added to the MSCI Global Smallcap Index, including ACC, Anand Rathi Wealth, Dreamfolks Services, Five Star Business Finance, Glenmark Lifesciences, ICRA, Kalyan Jewellers, Marksans Pharma, Mrs. Bector’s Food, Neuland Laboratories, and Patel Engineering.
In the meantime, the following companies will leave the global smallcap index: Aditya Birla Capital, Ashok Leyland, Astral Ltd, BEML Land Asset, Cummins India, IDFC First Bank, NIIT, Paisalo Digital, REC, Supreme Industries, and Tata Communications.
After the MSCI announced in its index revision that the stock will be included in the MSCI Global Standard index as of September 1, 2023, shares of Supreme Industries rose to a record high of Rs 4,480, soaring 16% on the BSE.
How stocks are added to MSCI index
Companies are included in the indices at their free public float value, which is calculated by multiplying the foreign inclusion factor by the security price.
India’s top producer of plastic goods, Supreme Industries provides a broad and comprehensive selection of plastic goods. Plastic Piping Systems, Cross Laminated Films & Products, Protective Packaging Products, Industrial Moulded Components, Moulded Furniture, Storage & Material Handling Products, Performance Packaging Films, and Composite LPG Cylinders are some of the product categories in which the company operates.
The percentage of outstanding shares that are believed to be available for purchase by foreign investors on public stock markets is known as a security’s free float, according to MSCI.
For constituents with a free float equal to or more than 15%, the Foreign Inclusion Factor (FIF) is equal to the anticipated free float, rounded up to the nearest 5%. A component asset, for instance, will be included in the index at 25% of its market capitalization if its free float is 23.2%. The estimated free float is adjusted to the nearest 1% for securities with a free float of less than 15%.
How do the changes in MSCI index impact the Indian markets?
The composition of the MSCI Index can significantly affect the Indian stock market. Investor sentiment and capital flows may change significantly depending on whether Indian stocks are included or excluded in the index.
When an Indian company or group of equities is added to the MSCI index, there is often an increase in demand from international investors. The higher demand may result in higher stock prices and a more positive market as a whole.
Companies that are part of the index might experience greater trading activity and better liquidity, increasing their appeal to both domestic and foreign investors.
On the other hand, the removal of a stock from the MSCI index or a group of stocks might cause selling pressure and a drop in stock prices. This may have a negative impact on investor mood and lead to a wider market slump.
Companies omitted from the index might see a decline in trading activity and liquidity, which would make them less desirable to investors.
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