MSCI’s index changes result in passive flows because trillions of dollars in global funds track its benchmarks. When a stock is added or removed, index-linked ETFs and mutual funds are forced to buy or sell to mirror the index composition.
MSCI made cuts in its India Small Cap Index, deleting 22 stocks while adding 11. The removals from the index could be one of the highest in recent times.
“In recent times, more small-cap companies were being added to the MSCI small-cap index. This time, we have seen more deletions than additions, possibly because of a reversal in the trend in small caps,” said IIFL’s senior vice president, Sriram Velayudhan.
Acme Solar, Tata Technologies, Godrej Agrovet, and Hexaware Technologies are among the 11 stocks to be added to the small-cap index. Godrej Industries, Gujarat Alkalies and Chemicals and Aarti Drugs are among the 22 deletions.
IIFL said Coromandel’s inclusion would result in flows of $227 million, while Nykaa would receive $181 million.In addition, MSCI said the weightage of Cipla, Indus Towers and Grasim Industries has gone up in the Global Standard Index. This would lead to inflows of $45 million, $40 million and $16 million, respectively, IIFL said. The weightage of Astral went down, which may lead to an outflow of $15 million from the stock.India’s weight in the Global Standard Index was 19.4% as on the cutoff date.