Zomato, IRCTC, Mindtree stocks, others stare at $1 billion inflows after possible entry in MSCI India index

MSCI Standard Index could see the inclusion of SRF, Mindtree, IRCTC, Zomato and two other stocks in the upcoming November semi-annual index rebalancing, Edelweiss Alternative Research said. Analysts believe the inclusion of six scrips to the index could result in inflows worth $1.04 billion from foreign investors into these stocks. Morgan Stanley Capital International (MSCI), the global index provider, rebalances its indices semi-annually and quarterly. The semi-annual index review is expected to be announced in November this year with a cut-off date being the last week of October.

“We (Edelweiss Alternative Research) have been flagging off names (SRF, MPHASIS, MINDTREE, IRCTC & ZOMATO) since early September and all of these names along with a new addition (Godrej Prop) remains our high conviction inclusion for MSCI Standard Index for November Rebalance. If all the stocks make the cut then cumulatively, they will see inflows of $1 billion+,” said Abhilash Pagaria of Edelweiss Alternative Research.

Over $1 billion inflows expected

The brokerage firm believes SRF could be the largest beneficiary of inflows, with $245 million funds expected to come in favour of the chemical company. SRF is expected to have a weightage of 0.45% in the index. The second-largest fund inflows could be in favour of Mindtree. With 0.36% weightage, the IT company is expected to see $200 million worth of inflows. Mphasis is pegged as the third-largest recipient of inflows at $196 million. Further, analysts at Edelweiss estimate that Godrej Properties could attract $177 million from foreign funds. 

State-owned IRCTC could see $170 million of inflows, followed by $156 million in favour of newly listed Zomato. However, Edelweiss highlighted that although these two stocks qualify for inclusion in the MSCI Standard Index any meaningful decline from current levels till the cut-off date in October could hamper their chances. 

Technology sector weightage to surge

Edelweiss expects the weight of the technology sector in the MSCI Standard Index (India) to go up if the said stocks are included in the next rebalancing. “As per our assessment, out of the six inclusions, the top four names are from the technology pack. In case all the high conviction names get included, then the weight of the technology sector in MSCI Standard Index (India) can approximately rise from 18.2% to 19.5% by November 30, 2021,” they added. 

With more new-age tech firms expected to list on domestic bourses in the near future, Edelweiss believes that the technology sector’s weight could continue to move up. “After the listing of digital IPOs and once the lock-in period for pre-IPO investors come to an end , all the newly added names in Index from upcoming listings will see higher free float which will simultaneously lead to increase in the weightages of those stocks in the Index,” they added.