RIL stock weightage on global indices may increase, no fresh addition from India seen in MSCI’s May rejig

MSCI semi-annual review could take a breather in the upcoming May deliberations, after three eventful index rejigs, said Abhilash Pagaria, Head – Edelweiss Alternative & Quantitative Research. The May 2022 review of the global indices is likely to see no new addition from India as no listed security currently makes the cut to be added. However, Edelweiss believes Reliance Industries could see an increase in its weightage which will not have a major impact on the scrip. While no stock fits the bill as of now, Edelweiss has highlighted Jindal Steel & Power, Tata Elxsi, Voltas, among other stocks that could enter the index, provided the shares rise sharply till the cut-off date.

“In the wake of three eventful SAIR (Semi-Annual Review) – in November-20, May-21 and November-21 – we anticipate the upcoming May-22 SAIR to be less exciting one: there are no names yet that could make the cut in our view,” Edelweiss said in a note. The brokerage firm has highlighted 5 stocks that could enter the index if the share price rallies ahead of the cut-off date.

Further, Indraprastha Gas could exit MSCI indices if the stock tanks 5-10% while MRF (India) could exit if the scrip will fall 10-15%.

Reliance Industries weightage may increase

Reliance Industries could see a change in weightage as partly paid shares of the company have been converted into ordinary shares. “Weight up could be seen in Reliance Ind – Post the conversion of Partly Paid-up shares to Ordinary shares in November 2021, the domestic Indices (Nifty and Sensex) have already made the adjustments and now we expect MSCI to take the same into account in May Review,” Edelweiss said. Inflows for RIL could be around $180-200mn which is appx half a day’s Average Daily Value. Changes to MSCI indices are likely to be announced in May with a cut-off date of 18-29 April.

India’s journey on MSCI indices

The previous three semi-annual reviews have been eventful for domestic markets as  India’s weighting in the widely tracked MSCI Emerging Markets (EM) index shot up to approximately 12.3% now from 8.1% at the end of October 2020. “The two factors that have driven fresh inclusions and an uptick in the weightings of existing Indian constituents are: i) the new regime on foreign ownership limit (FOL) taking effect in the Nov-20 review; and ii) domestic stocks’ strong outperformance to other EM counterparts.,” the note said. 

The number of Indian stocks in the MSCI Standard index has soared to more than 100 now from 87 in October 2020.