Slew of inclusions to MSCI Smallcap index to attract inflows worth $142 million

Slew of inclusions to MSCI Smallcap index to attract inflows worth $142 million

The recent update to MSCI’s Smallcap index has brought about a significant change by incorporating 42 Indian stocks, a move that is expected to have noteworthy implications for the affected companies and the investment landscape. Some of the prominent names included in this adjustment are SJVN, Gokaldas Exports, PTC India, and NLC India.

The adjustment in the small-cap index is not merely a procedural change but is anticipated to attract substantial cumulative flows into the newly included stocks. Estimates provided by Nuvama Alternative & Quantitative Research suggest that these flows could reach up to $142 million. Such projections indicate a potential influx of capital from investors, driven by the increased visibility and attractiveness of these stocks following their inclusion in the MSCI Smallcap index.

Nuvama Alternative & Quantitative Research’s calculations likely take into account various factors such as market capitalization, liquidity, and other quantitative metrics to arrive at their estimates. Investors and market participants keenly follow these calculations as they offer insights into the expected impact on stock prices and overall market dynamics.

For the companies involved, being included in the MSCI Smallcap index can be viewed as a positive development. It not only enhances their visibility among global investors but also makes them part of a widely tracked benchmark, potentially leading to increased trading activity and liquidity. Additionally, inclusion in such indices can attract investment from index-tracking funds and institutional investors, further contributing to the companies’ market value.

As these adjustments come into effect, market participants will closely monitor the performance of these newly included stocks, considering the potential for increased trading volumes, price volatility, and overall market sentiment surrounding these additions to the MSCI Smallcap index.

The effective date for these adjustments is scheduled for the market close on November 30. Among the stocks added to the index, SJVN is expected to experience the highest inflows, estimated at around $9 million, followed by Gokaldas Exports with $6 million. Other stocks like PTC India, NLC India, Hindustan Construction, Electrosteel Castings, Arvind, and Gateway Distriparks could also see notable inflows ranging from $5 million. This inclusion in the MSCI Smallcap index is likely to have implications for the valuation and trading activity of these stocks in the market.

In addition to the previously mentioned stocks, other companies added to the MSCI Smallcap index, such as Concord Biotech, Astra Microwave, Orient Cements, Tilaknagar Industries, Gabriel India, and Jai Balaji Industries, are also expected to witness increased inflows, each estimated at $4 million.

Furthermore, a group of stocks including DB Corp, Pricol, Ashoka Buildcon, Shyam Metallics, Texmaco Rail & Engineering, Max Infra, Jain Irrigation Systems, Electronics Mart India, Force Motors, MOIL, and Dodla Dairy, are also part of the MSCI Smallcap index additions. These stocks are projected to attract inflows in the range of $2-3 million each, contributing to the overall impact of the index adjustments on the respective companies’ valuations and market activities.

The announcement of inclusion in the MSCI Smallcap index resulted in strong gains for the mentioned stocks, with most of them experiencing surges ranging from 1% to 7%, except for MOIL. This market response indicates positive investor sentiment and potential increased demand for these stocks following their addition to the index.

On the flip side, three stocks—Suzlon Energy, APL Apollo Tubes, and Persistent Systems—were excluded from the MSCI Smallcap index as they migrated to the MSCI Global Standard index. Such exclusions can have implications for these stocks, potentially impacting their valuations and trading activities as they move to a different index. Investors often pay attention to such index changes as they can influence fund flows and investment strategies.

The exclusion from the MSCI Smallcap index has potential implications for several stocks, with Jindal Stainless likely to see outflows estimated at $26 million. Solar Industries, Dalmia Bharat, and Oberoi Realty may also experience outflows, each estimated at $24 million and $23 million, respectively.

Additionally, several other notable names were excluded from the MSCI Smallcap index, including BHEL, ACC, Vodafone Idea, Linde India, Thermax, Indian Bank, Escorts Kubota, Oil India, Tarsons Products, and Delta Corp. In total, 19 stocks were removed from the MSCI Smallcap index, contrasting with the addition of 42 stocks. This shift in the index composition is expected to influence the valuations and trading dynamics of the excluded stocks in the market. Investors often monitor such changes as they can impact investment strategies and fund flows.