The MSCI Global Standard Index, a widely used benchmark for global equity funds, has announced its latest quarterly review on August 11, 2023. The index provider has added eight Indian stocks and dropped one from its India index, effective from September 1, 2023. The changes are expected to trigger significant fund flows in and out of the affected stocks.
PFC, REC among the new entrants
Among the eight stocks that have been included in the MSCI Global Standard India Index are two state-owned power sector companies: Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). Both these stocks have gained over 50% in the past year, driven by strong earnings growth and improved asset quality. According to a report by Nuvama Alternative and Quantitative Research, PFC and REC are likely to see inflows of $203 million and $153 million, respectively, from the index inclusion.
HDFC AMC, IDFC First Bank also make the cut
Another notable addition to the index is HDFC Asset Management Company (HDFC AMC), the largest mutual fund house in India by assets under management. HDFC AMC has seen its stock price surge over 80% in the past year, as it benefited from the recovery in the equity markets and the growth in its passive funds business. The index inclusion is expected to result in an inflow of $204 million for HDFC AMC.
IDFC First Bank, a private sector lender that was formed by the merger of IDFC Bank and Capital First in 2018, has also been added to the index. The bank has witnessed a turnaround in its performance in the past few quarters, as it improved its asset quality, profitability, and deposit base. The bank’s stock price has more than doubled in the past year, making it one of the best performers among Indian banks. The index inclusion is likely to bring in an inflow of $196 million for IDFC First Bank.
Astral, Cummins India, Supreme Industries, Ashok Leyland complete the list
The remaining four stocks that have been added to the index are Astral, Cummins India, Supreme Industries, and Ashok Leyland. Astral is a leading manufacturer of pipes and adhesives, with a diversified product portfolio and a strong distribution network. Cummins India is a subsidiary of Cummins Inc., a global leader in power solutions and engines. Supreme Industries is a leading player in the plastic products industry, with a presence across segments such as packaging, industrial, consumer, and infrastructure. Ashok Leyland is one of the largest commercial vehicle manufacturers in India, with a dominant market share in buses and trucks.
All these four stocks have delivered robust returns in the past year, as they benefited from the recovery in demand and the improvement in their operational efficiency. The index inclusion is expected to result in inflows of $173 million for Cummins India, $170 million for Astral, $169 million for Supreme Industries, and $168 million for Ashok Leyland.
ACC gets excluded from the index
The only stock that has been excluded from the MSCI Global Standard India Index is ACC, one of the oldest cement companies in India. ACC has seen its stock price underperform its peers in the past year, as it faced challenges in terms of capacity utilization, pricing power, and cost inflation. The index exclusion is expected to result in an outflow of $92 million for ACC.
India gets six NOC slots
The eight stocks that have been added to the index were selected via the non-overlapping country (NOC) route, which allows MSCI to include more stocks from countries that have fewer overlapping constituents with other regional or global indices. India received six NOC slots for this review, which is the highest number seen in recent times. This indicates that MSCI recognizes the potential of Indian equities and wants to increase its exposure to them.