The upcoming MSCI India rebalancing could drive estimated passive inflows of about $2.3 billion into Indian equities, with as many as 12 inclusions and three exclusions likely in the August review cycle, according to a report by JM Financial Research.
Key Highlights
- MSCI India rebalancing could drive $2.3 billion in passive inflows with 12 inclusions expected in August.
- Groww and Adani Green Energy emerge as high-probability entrants, with estimated inflows over $770 million each.
The changes are scheduled to be announced after market hours on August 12 and implemented from August 31, and are expected to significantly alter the index composition, triggering fund flows from global passive investors tracking MSCI benchmarks.
High-Probability Entrants
Among the potential entrants, Adani Green Energy, Adani Energy Solutions, and investment platform Groww (Billionbrains Garage Ventures) have emerged as high-probability candidates for fresh inclusion. The brokerage estimates that Groww's addition could bring passive inflows of $821 million, while those for Adani Green are estimated at around $773 million. Ather Energy is seen as a medium-probability contender, contingent on further improvement in its free-float-adjusted market capitalisation during the observation period.
Small Cap-to-Standard Migration
The brokerage also identified Laurus Labs and Biocon as strong candidates for migration from the MSCI Small Cap Index to the Standard Index in the August review. This migration could bring passive inflows of $554 million into Laurus Labs and $285 million into Biocon. Mid-tier IT firm Coforge falls in the medium-probability category for migration, with estimated inflows of $567 million if included.
Also Read: 68% of Indian Retail Investors Now Invest in Passive Funds: MOMF
Astral, SBI Cards Face Potential Exclusion
On the flip side, Astral is seen as a high-probability exclusion from the index, while SBI Cards and Payment Services is classified as a medium-probability removal. The exclusion of SBI Cards could result in an outflow exceeding $140 million, while that from Astral could be around $138 million, according to the estimates. Balkrishna Industries could also face a low-probability exit.
Index Snapshot
India currently has around 165 constituents in the MSCI India Standard Index, with a total market capitalization of approximately $3.2 trillion. Market participants typically track MSCI index reviews closely, as changes tend to result in significant trading volumes and short-term price movements in affected stocks, driven largely by passive fund adjustments.
