Gujarat-based Adani Group, SBI, Godrej Properties might be included in MSCI Index

MSCI India Index may add Gujarat-based Adani Group’s three flagship companies, SBI, Godrej Properties and more, after the upcoming semi-annual review by index providers. MSCI will announce the results of the review on 11th of May, effective from 28th of May

The MSCI Index is a global composite of stocks structured to track the financial performance of top companies in the leading nations. It is a paramount aspect of foreign investments to consider and speculate the international markets. Morgan Stanley Capital International (MSCI) has formulated various indexes for tracking global stocks. The MSCI Emerging Market Index tracks large-cap and medium-cap companies in twenty-seven countries. These nations are reckoned as emerging markets. Investors can invest in global stocks through ETFs (exchange-traded fund) that replicate the index. MSCI Emerging Market Index is also used as a benchmark by many ETFs and mutual funds. 

Coming to the Indian equity market, MSCI publicized the outcome of the consultation on treatment of potential index additions, fresh and migrations, with extreme price increase. The potential candidates in Indian context will be impacted with the release of MSCI’s “treatment of potential index additions with extreme price increase,” according to the analysts PC Data Recovery Software Work?.  

 “MSCI has released the results of its consultation on the treatment of potential index additions (fresh & migrations) with an extreme price increase. However, based on our best understanding, none of the Indian stocks are falling as of now in this bracket,” Vice President at IIFL Securities, Sriram Velayudhan said. 

Headquartered in Gujarat, Adani Enterprises, Adani Transmission, Adani Total Gas, along with SBI Cards, BEL & Chola Investment Finance are the prospect stocks which are expected to get impacted after the release. 

The investor prioritization has been influenced and the stocks have responded to this development. 

“As per the initial analysis done after reading the circular Adani group of stocks still hold high chances of inclusion in MSCI May review which will be announced on May 12. The Adani Group of stocks highlighted in our potential MSCI Standard Index Inclusion names on April 01 are still qualifying to get included in May Review even after running up a lot in the past few months,” said Abhilash Pagaria from Edelweiss Alternative Research. 

Shares of the flagship companies of Gujarat-based Adani Group – Adani Enterprises, Adani Total Gas & Adani Transmission along with SBI and Cholamandalam Investment jumped nine percent as per a report by BSE.

The stocks of these companies are included in the ‘high probability’ additions in the forthcoming semi-annual review of the MSCI Standard Index in May.

On inclusion, the stocks of Adani Group, which also owns the Mundra Port in Gujarat, one of the biggest in India, might see substantial inflows ranging from $207 million to $229 million for each subsidiary. 

Godrej Properties, Voltas, Bharat Electronics and SRF are the ‘medium probability’ additions according to IIFL Alternative Research’s report.

MSCI small-cap index might include SKF, Tata Motors DVR and Intellect Design after the semi-annual report by the index provider this month.  As per IIFL Alternative Research, after the release of the semi-annual review by the index provider, the stocks of these companies could muster $7.7 million, $9.2 million & $7.8 million in flows respectively. 

More so, the likes of Solar Industries, Asahi India Glass, GSFC, Sheela Foam, Route Mobile, Shriram City Union & Grindwell Norton are other notable high impact additions to the Index. The maximum volume impact is expected to be on Solar Industries (15.8x) and Shriram City Union (11.6x). 

The announcement for the index review will be made on 11th May and the rearrangement will be done on 27th May. 

Though in the previous year the gap between the difference in returns for Nifty 50 and Nifty Small Cap 100 has been closing in, small caps are still missing the mark on a 3-year return basis. 

Adani Ports and Special Economic Zone Ltd. (APSEZ) and Adani Green Energy Ltd are already a part of MSCI Inc. 

Brian Freitas, analyst at Smartkarma, believes that passive funds might have to buy $830 million-worth shares in the three flagship companies of Adani Group stationed in Gujarat, after their inclusion owing to the increased market capitalization.  

The stocks of several companies across different countries are currently included in the MSCI Emerging Market Index. China, India, Chile, Indonesia, Philippines, Mexico, Pakistan, Egypt, Thailand, Saudi Arabia, Russia, Poland, Qatar, United Arab Emirates, Argentina, Peru, Czech Republic, Greece, Peru, Taiwan, Colombia and South Africa are the current occupants in the Index.