Indian stock markets declined sharply in the closing session on Friday, triggered by a late sell-off possibly due to the impact of the MSCI adjustment exercise. Sensex dropped nearly 1,000 points to close at 81,287.19, while benchmark Nifty 50 settled below the 25,200 mark, led by losses in realty, auto and FMCG stocks.
The MSCI February 2026 index review became effective at the close of trading on Friday, Feb. 27, on the last business day of the month. The review has triggered some rebalancing, with an estimated net outflow of around $260 million from Indian equities.
As part of the adjustments, Aditya Birla Capital Ltd and L&T Finance Ltd have been added to the MSCI Global Standard Index, while IRCTC has been removed. Additionally, AU Small Finance Bank Ltd will see an increased weight following a float adjustment, a move that usually draws passive inflows as index-tracking funds rebalance their holdings.
Despite these changes, India's overall weight in the MSCI Standard Index remains steady at 14.1%, and the total number of Indian companies in the index will rise from 164 to 165.
The February review also brought several changes to the MSCI Smallcap Index. Among the Indian additions are Premier Energies, National Securities Depository, Emcure Pharmaceuticals, JSW Cement, Ashapura Minechem, Canara HSBC Life Insurance and Thyrocare Technologies. Stocks like Akzo Nobel India saw their weightings increase following float adjustments.
Following the review, the number of Indian stocks in the MSCI Smallcap Index will drop to 480 from 508.
Also Read: Stock Market Crash: Nifty Key Support Slips To 24,600 Post MSCI Rejig
Why MSCI Adjustments Matter
MSCI adjustments are closely monitored because many global investment funds track its indices passively. When MSCI adds a stock, FIIs usually prefer to buy it and when a stock is removed from the index, foreign investors often prefer to sell the shares. This automatic buying and selling can cause substantial shifts in foreign institutional investment (FII) flows, affecting stock prices, market liquidity and investor sentiment.
Last-Minute Market Volatility
Experts noted that while there were no major technical triggers behind the fall in benchmark indices on Friday, MSCI's adjustments played a key role in the last-hour volatility. The decline was further amplified by a softer rupee, renewed selling by foreign institutional investors and persistent overhangs in several Nifty heavyweights. Combined with breached technical levels, these factors contributed to a risk-off sentiment among traders, intensifying the market slump.
Also Read: MSCI Rejig: AB Capital, L&T Finance Added In Global Standard Index; IRCTC Removed In February Review
What's MSCI Adjustment?
Global index provider MSCI, or the Morgan Stanley Capital International, conducts periodic reviews of the companies included in its indices. The process is closely watched by investors worldwide. MSCI offers stock indexes, portfolio risk analytics and governance tools to institutional investors and hedge funds, and is particularly known for its benchmark indices, which are periodically reviewed.
An MSCI adjustment, or rejig, occurs four times a year in February, May, August and November. During these reviews, MSCI may add new companies, remove existing ones or alter their weightings. The changes take effect at the close of the last trading day of the respective month.
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