India has regained its position as the second-most-weighted emerging market after recent wealth erosion in Adani Group stocks. India currently has about 15.5% weight on the MSCI Emerging Market Index (EM), compared to about 15.11% for Taiwan. Post the November rebalance, India's stock count will rise to 131, and its weights are set to move close to 16.3 percent, compared to the current 15.5 percent. "India's representation in the EM index will reach an all-time high, marking a significant increase over the past three years, almost doubling its weight," Nuvama Alternative & Quantitative Research highlighted in a note. This achievement can be attributed to India's superior performance compared to other emerging markets.
With about 30% weight in the index, Mainland China has the highest weighting on the globally tracked gauge. Global index services provider MSCI is unlikely to consider elevating South Korea from the emerging market classification to the developed market (DM) list after Seoul imposed a ban on short selling of shares. If South Korea were to transition from the EM to the DM category next year, India's weight could potentially rise to about 18.5%, resulting in an influx of close to $2–2.5 billion from passive funds.
The MSCI index rejig has included nine Indian stocks, including Paytm, IndusInd Bank, Suzlon Energy, Persistent Systems, and Paytm parent One97 Communications, in the MSCI Global Standard Index. No Indian stocks were excluded from the index this time. IDFC First Bank, Max Health, Paytm, Polycab, PFC, REC, and Supreme Industries have been included in the MSCI India Domestic Index. The adjustments will come into effect at market close on November 30.
According to Nuvama research, IndusInd Bank's is expected to bring inflows worth $290 million, while Suzlon Energy may drive home $264 million. The addition of Persistent Systems could attract flows of $258 million, while Paytm's could be $163 million. The inclusion of APL Apollo, Polycab, Macrotech Developers, Tata Motors DVR, and Tata Communications could attract inflows of $227 million, $190 million, $183 million, $173 million, and $160 million, respectively. Post-inclusion, the stock is likely to be classified as a mid-cap stock, an upgrade from its current small-cap status by the Association of Mutual Funds in India (AMFI).
Stocks like Reliance Industries, ICICI Bank, Infosys, HDFC Bank, TCS, and others have seen a decrease in their weightage, which may lead to proportionate outflows.
The MSCI India Smallcap Index will also see the inclusion of 42 stocks, while 19 stocks will be excluded from the index. Key entrants include Ashoka Buildcon, Arvind Fashions, Concord Biotech, DB Corp., Force Motors, Gokaldas Exports, MOIL, Hindustan Construction Company, Orient Cements, PTC India, SJVN, and Ujjivan Financial Services, among others. On the other hand, ACC, APL Apollo Tubes, BHEL, Delta Corp., Indian Bank, Jindal Stainless, OIL India, Persistent System, Suzlon Energy, Thermax, and Vodafone Idea, among others, will be excluded from the MSCI Smallcap Index.