India is poised to attract an estimated $2.5 billion in passive foreign inflows, following the latest MSCI Emerging Markets Index reshuffle in November 2024, as forecasted by Nuvama Alternative & Quantitative Research. The brokerage remains structurally bullish on India.
The reshuffle, announced early on Thursday, signifies a noteworthy leap for India's position within emerging markets, increasing its weight to 19.8% from 19.3%, while China's EMI weight slipped from 27% to 26.8%. The adjustment is set to take effect on Nov. 25 and includes several notable stock upgrades and additions, solidifying India's standing in global indices.
The November MSCI report upgraded Kalyan Jewellers India Ltd., Voltas Ltd., and Bombay Stock Exchange from the small-cap to mid-cap segment, while Oberoi Realty Ltd. and Alkem Laboratories Ltd. joined the index as fresh entries. No Indian stocks were removed from the index, an outcome that boosts India's total stock count in the MSCI Emerging Markets Index to 156. The MSCI Small-Cap Index added a net of 13 Indian stocks, expanding India's footprint to 525 stocks in the small-cap segment.
This increased representation marks a significant milestone, not only in boosting India's weight within the index, but also in attracting substantial foreign capital through passive investment flows, Nuvama said. With inflows largely driven by foreign institutional investors tracking the index, the reshuffle reflects growing global confidence in India's economic landscape.
HDFC Bank Ltd., India's most heavily weighted stock in the MSCI EMI at 7.08%, is expected to receive additional attention. Nuvama's analysis projects approximately $1.9 billion in inflows for HDFC Bank alone, resulting from a final tranche of float-led weight adjustments, potentially equivalent to 6.5 days of average daily volume. Other stocks experiencing weight increases include Tata Power Co., Interglobe Aviation Ltd., and JSW Energy Ltd., highlighting India's strengthening market position.
The rejig has sparked optimism for sustained growth, with Nuvama affirming a bullish outlook on India. Domestic mutual funds, high-net-worth individuals, and retail investors are likely to play an active role, and the brokerage anticipates even greater representation in the EMI.
India now trails China in the MSCI EMI, yet the trend suggests a narrowing gap. With China's weight reduction and India's climbing share, Nuvama noted India's potential for further additions, strengthening the country's presence in the EMI. "There is enormous potential for far more additions to happen for India".
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