Torrent Pharmaceuticals and RBL Bank are set to be in focus after MSCI announced index changes that are expected to trigger sharply different passive fund flows into the two stocks.
According to Nuvama Alternative & Quantitative Research, Torrent Pharma is likely to see passive inflows of about $167 million (Rs 1,608.67 crore) after MSCI increased both its Number of Shares (NOS) and Foreign Inclusion Factor (FIF) in the MSCI Global Standard Index. The change will take effect after market hours on July 16, becoming effective from July 17.
Nuvama estimates the expected inflows are equivalent to nearly 5.5 times Torrent Pharma's average daily trading volumes, potentially making the stock one of the key beneficiaries of the latest MSCI adjustment.
Passive inflows occur when index-tracking funds rebalance their portfolios to reflect changes announced by index providers, often leading to increased demand for stocks receiving higher weights.
In contrast, RBL Bank is expected to witness passive selling after MSCI decided to remove the lender from the MSCI Global Small Cap Index. The deletion will also become effective after the market closes on July 16, with implementation from July 17.
According to Nuvama, the exclusion is linked to a reduction in the bank's foreign ownership headroom, making it ineligible under MSCI's methodology. The brokerage estimates the change could trigger passive outflows of more than $25 million (or Rs 241.06 crore) from RBL Bank as index-linked funds adjust their holdings.
MSCI index reviews are closely tracked by market participants because they often result in sizeable one-time buying or selling by exchange-traded funds and other passive investment vehicles that replicate the benchmark.
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