MSCI Rejig: India May See $1 Billion Inflow; Mamaearth, IREDA May Get Added To Small-Cap Index

India could see close to $800 million to $1 billion in passive inflows of foreign funds, with public sector undertakings ruling the inclusions in the February Review, according to Nuvama Alternative & Quantitative Research.

MSCI may add Mamaearth's parent, Indian Renewable Energy Development Agency Ltd., and Cello World Ltd., among the companies that went public last year, to its small-cap index in the rejig scheduled for February, said Nuvama.

Jindal Stainless Ltd., Punjab National Bank, Bharat Heavy Electricals Ltd., NMDC Ltd. and Oberoi Realty Ltd. currently qualify for inclusion in the MSCI Standard Index, it said.

Indian Renewable Energy Development Agency Ltd., Mamaearth's parent Honasa Consumer Ltd., and Cello World Ltd. will bring inflows worth $12 million, $5 million, and $7 million, respectively.

Jaiprakash Associates Ltd. and RR Kabel Ltd. are among the other stocks that could be included in the MSCI Smallcap index, according to Nuvama.

GMR Airports Infrastructure Ltd., Prestige Estates Projects Ltd., and Rail Vikas Nigam Ltd. could be excluded from the index.

India currently commands a 17.8% share in the MSCI Emerging Market Index. Due to the country's current momentum and outperformance as compared with other emerging markets, Nuvama projects the index representation to move upwards to 18.5%.

This can be attributed to multiple reasons:

• India's standardised foreign ownership limit in 2020.

• Robust performance by Indian equities, particularly in the midcap segment, led to numerous inclusions in every review.

• Relative underperformance by other EM packs, especially China.

The notable factors contributing to this increase in 2023 include India's substantial rally compared to other emerging markets and MSCI's shift from semi-annual to quarterly rebalancing for stock inclusions and exclusions, said Nuvama.