MSCI India Rejig: Top 10 Stocks to Watch Out

In recent months, Indian share markets have faced a series of hurdles, from news surrounding mounting concerns about inflation and escalating interest rates to the pervasive effects of a global economic slowdown.

Nevertheless, benchmark indices have come out of each crisis stronger than ever.

However, foreign investor sentiment, a critical driver in market dynamics, has experienced a decline, with FIIs adopting a net selling stance in the Indian market.

Nevertheless, there are still some stocks that are seeing inflows from foreign investors.

The MSCI recently made some changes as part of its rejig that happens every year and some stocks are expected to see inflows from foreign investors.

What is the MSCI Index?

The MSCI Emerging Markets (EM) index, conceived by Morgan Stanley, is an equity index designed to encompass large-and mid-cap companies spanning 26 emerging market nations.

Started in 2001, the index embraces around 1,387 listed entities, constituting 85% of the free float market capitalisation in each country.

Inclusion in the index mandates companies to meet specific criteria, including minimum thresholds for full market capitalisation, free-float market capitalisation, stock liquidity, and foreign inclusion factors.

Global investors widely monitor the MSCI index, with numerous asset management firms, foreign pension funds, sovereign wealth funds, and similar entities leveraging these indexes to determine their allocations in countries and individual companies.

A surge in India's weighting in the MSCI index holds the potential for substantial capital inflows into the Indian stock markets.

November 2023 Index Additions

The MSCI India index added nine new stocks in the November 2023 review.

#1 IndusInd Bank

IndusInd Bank is one of the new-generation private sector banks in India.

The bank's business lines include corporate banking, retail banking, treasury, foreign exchange and more.

IndusInd Bank plans to expand its product and service offerings and increase its branch network. The bank is also looking to grow its digital presence and explore new business opportunities.

It also plans to reach 2,500 branches by the end of the financial year 2023 and 3,500 branches in the next three years.

#2 Suzlon Energy

Suzlon is a renewable energy solutions provider.

The company is involved in the business of manufacturing, project execution operation and maintenance of wind turbine generators and the sale of related components.

Looking ahead, Suzlon Energy is focused on expanding and increasing the capacity of its 3-MW turbines. The company's order book, consolidated at 1.6 gigawatts, is comprised of 55% 3-MW turbines and 45% 2-MW turbines.

#3 Paytm

Paytm is India's leading financial services company that offers payments and financial solutions to consumers.

It's an Indian-based mobile internet company and a subsidiary of One97 Communications Limited.

The central bank has launched a product widely used by fintech firms to form collaborations with banks and Non-Banking Financial Companies (NBFC), this will further help Paytm to recoup losses that occur when customers default on payments.

#4 Polycab India

The company is one of the largest manufacturers of cables, wires, and allied products.

It also has exposure in segments including fast-moving electrical goods (FMEG) such as fans, switches, LED lights, solar inverters, and pumps.

The company has also entered the EHV market. India's growing power demand, especially in Tier 1 and 2 cities and smart cities, is fuelling the need for high voltage (HV) and extra-high voltage (EHV) cables.

Going forward, its continued focus on FMEG business and market dominance could support revenue and profit growth.

#5 Macrotech Developers

Macrotech Developers was formerly known as Lodha Developers. It is among the largest real estate developers in India and has been involved in the real estate business since the 1980s.

With the real estate industry in its growth phase, the company expects to grow its revenue and profits in the medium term.

#6 Tata Motors DVR

Tata Motors DVR, formerly known as Tata Motors Differential Voting Rights shares, is a class of shares issued by Tata Motors Limited, an Indian multinational automotive manufacturing company.

The company has a high dividend yield and exposure to the growth potential of Tata Motors.

#7 Tata Communications

Tata Communications is an Indian telecommunications company. The company is part of the Tata group.

It provides network services and software-defined network platforms, such as ethernet, SD-wan, content delivery networks (CDNs), internet, multiprotocol label switching (MPLs), and private lines.

Moving forward, Tata Communications is targeting revenue growth of 10% in the next three years.

This growth will be driven by the company's focus on innovation, expansion into new markets, and acquisition of new businesses.

#8 Gokaldas Exports

Gokaldas Exports is one of the largest manufacturers and exporters of apparel in India.

Its product range spans outwear, casual wear and bottom wear for men, women and children.

Gokaldas Exports is capitalising on the China Plus One opportunity by expanding its capacities across existing and new facilities.

#9 SJVN

SJVN Ltd is a Mini-Ratna, Category I status company engaged in the business of power generation and engineering consultancy.

SJVN Ltd is a Mini-Ratna, Category I status company engaged in the business of power generation and engineering consultancy.

SJVN has ambitious plans to expand its renewable energy capacity. Over the next three years, the company aims to add 10,000 MW of renewable energy capacity.

Which Other Stocks Could see Inflows?

In contrast to the additions, there were no removals from the MSCI India Index in the November 2023 review. This indicated that the overall composition of the index remained strong and that there were no major concerns regarding the performance of any of the existing constituents.

Additionally, seven stocks - IDFC First Bank, Max Healthcare, Paytm, Polycab, PFC, REC, and Supreme Industries - have been included in the MSCI Domestic Index.

Stocks like Zomato, Hindustan Aeronautics, REC, and PFC, which are already part of the MSCI Global Standard Index, have seen an increase in their weightage.

On the other hand, stocks like Reliance Industries, ICICI Bank, Infosys, HDFC Bank, TCS and others have seen a decrease in their weightage.

Conclusion

Based on media reports, an expected passive inflow of around US$ 1.5 billion (bn) is foreseen for India post the planned restructuring on 30 November 2023.

Choosing to invest in stocks featured in the MSCI index provides a strategic avenue for exposure to a diverse global portfolio, historically showcasing superior performance compared to asset classes such as bonds and cash.

However, it is crucial to acknowledge that while the MSCI index presents opportunities, investing in stocks inherently carries risks and does not guarantee assured success.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...