Ahead of MSCI announcing its Semi-Annual Index Review on early Friday, Edelweiss Alternative Research has reiterated its high conviction inclusion names along with two stocks for exclusion from MSCI Standard Index.

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The rebalancing for the MSCI rejig will take place on November 30 and the changes will be effective from December 1, Abhilash Pagaria of Edelweiss Alternative Research said in a note.

Index rejigs are a key event for the market because they help the market participants to gauge the direction in which the funds are moving.

An increase or decrease in the weightage of stock, or addition or deletion of a stock, hints at further fund inflows or outflows and several investors position themselves in the market accordingly.

An index rejig is followed by a rebalancing exercise by exchange-traded funds or mutual funds that mimic the index, to re-align their portfolio according to the changes.

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The index constituents are rearranged so as to maintain the proportion of asset allocation or keep the risk at a level in accordance with the index’s stated methodology.

Tata Power, SRF, Mphasis, Godrej Properties, Mindtree, Indian Railway Catering and Tourism Corporation (IRCTC) and Zomato are on the inclusion list and could see inflows ranging from $153 million to $240 million, the note showed.

If all of the above 7 names get included then India can see a passive flow of about $1.3 billion, Pagaria had said in a note in October.

While these stocks are high conviction inclusions, Edelweiss Alternative Research has medium to low conviction on the exclusion of IPCA Laboratories and REC. IPCA Labs could see an outflow of $109 million and REC might see an outflow of $101 million.

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Edelweiss Alternative Research continues to maintain Wipro as its high conviction inclusion candidate for S&P BSE Sensex Index and Bajaj Auto as its exclusion candidate.

The official announcement will take place around mid-November and adjustment will take place on December 16, the note said.

Wipro may see an inflow of $151.4 million whereas Bajaj Auto could see $75.6-million-worth outflow, Pagaria wrote in the note.

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First Published:Nov 9, 2021 3:15 PM IST