MSCI November Rejig: Key Stocks To Watch

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#MSCI adds nine Indian stocks to its Emerging Markets Index in its November review. #IIFLSecurities' Sriram Velayudhan shares the impact of this rejig. #BQLive #BQStocks

Transcript

00:00 Hello and welcome to BK Primer.

00:01 Very good morning to all the viewers.

00:03 I am Hiral Dadia.

00:04 MSCI has gone ahead and now put out a list of their November review.

00:09 Let's understand what has changed for the Indian stocks and the Indian markets.

00:13 Specifically, Suzlon Energy, IndusInd Bank, Paytm, these are a few of the names amongst

00:18 the nine inclusions that we are seeing.

00:21 And what is interesting is that there have been no exclusions or deletions.

00:26 Let's welcome in our guest, Shriram Velayudhan, Senior Vice President, Alternative Research

00:31 at IFL Securities to understand more as to what it would mean from an overall inflow

00:36 perspective for the Indian markets and going ahead.

00:39 Shriram, good morning and welcome to the show.

00:42 Hi, good morning.

00:43 So, Indus provider, MSCI announced the changes for the November review today early morning

00:52 Indian Standard Time.

00:53 So, in terms of the changes in the MSCI India Standard Index, which is the main index, largely

01:01 the changes have been in line with what IFL Alternative Research had anticipated.

01:08 So, in terms of high impact addition, we have Tata Motors GVR, which we expect to see to

01:18 be close to the tune of $145 million, which is 13 days average daily value traded.

01:26 The other impact additions are APL Apollo and Loda, macro tech developers.

01:32 So, these both means again we anticipate a really impact of between 10 to 12 days.

01:39 While APL Apollo should see inflows of $200 million, Loda, our estimate is, estimate of

01:46 the inflows $145 million.

01:48 Other additions to the MSCI India Standard Index are Tata Communications, Purchase Time,

01:55 Investing Bank, Polycast, APM and Suzlon Energy.

01:58 Suzlon Energy is a high profile addition.

02:01 In fact, it is a migration from the MSCI India Small Cap Index to the Standard Index.

02:09 We expect inflows of $240 million in Suzlon Energy on 30 November.

02:15 So, all these changes will take place up and over on 30 November.

02:21 So, this rebalance is a net inflow, will be a net inflow event of roughly $1.2 to $1.25

02:30 billion on 30 November.

02:32 Right.

02:33 So, Sriram, what you're saying is basically with the inclusion or the increase that we've

02:37 seen in the stock weightage will lead to inflows from passive funds that could be in that range

02:42 of $1.2 to $1.5 billion, right?

02:46 Now, taking this into consideration…

02:48 So, I would just like to correct, Indra, we would just like to correct the way it works

02:52 is not necessarily these additions will start up, will attribute for the inflows that we

03:02 will see in India.

03:03 We also will have to, like you know, we will have to assess what the impact is for the

03:09 other regions.

03:10 So, let's say the nine additions which are taking place in India in terms of float market

03:16 capitalization and also there are few greater names like Vedanta, Colgate, Hindustan Aeromatics,

03:21 Zomato, PSP and all.

03:23 So, all these, what it means is $1.2 to $1.25 billion, the additions which are taking, the

03:30 additions and the greater which are taking place in India is on the higher side when

03:34 we compare with the other emerging markets.

03:37 Got it.

03:38 Now, with this taking into consideration, any surprises that have come at your end because

03:44 clearly Suzlon is an interesting one that has been added as well, yes?

03:48 There was a lot of expectation of Suzlon being included.

03:52 What's your view?

03:53 Because from here on, you know, there's a probability where Suzlon could actually be

03:59 a contender for shifting to the mid-cap category from the small cap category as well when we

04:04 see the Amphi rejig happening with regards to January.

04:08 Apart from that, clearly Suzlon that has become a high conviction November entrant already

04:15 and you have the FTSE rejig that is expected as well.

04:18 How does this entire stack up for a Suzlon?

04:21 So, Suzlon was very much there in our list of expectations.

04:28 We have been, so we consistently keep a track of the additions and likely divisions that

04:38 take place in the Amphi and the standard interventions.

04:40 This is one of the key indices for India.

04:42 So, in terms of Suzlon, it was very much there in our list of expectations.

04:50 So, that has played out.

04:53 There was an element of uncertainty as well in few pockets of the market like may Suzlon

05:00 may get added or not.

05:03 So, hence, what we are seeing today is like you know the prepositional, the last-click

05:09 prepositional, who are at risk circumspect about Suzlon whether it will get added or

05:16 not.

05:17 That element of stop is getting witnessed in the prices today.

05:22 So, in terms of FTSE, I am not expecting any changes with respect to FTSE.

05:33 Right.

05:34 So, Sriram, clearly, you know, if you have to see the free float and the promoter holding,

05:44 any names that you think have come in as a surprise, number one, and two, anything that's

05:50 out.

05:52 Right.

05:54 So, in terms of Suzlon, I am not expecting anything specific with respect to the FTSE

06:03 indices.

06:04 And again, for the ancillary classification part, this is something like you know, it's

06:10 for the active fund managers to decide whether they would want to take an exposure in Suzlon

06:14 or not.

06:15 Okay.

06:16 Sriram, reiterate in terms of any of the names that have come in as a surprise or a

06:23 name which should have been added has not been added if you have to take the free float

06:26 and the promoter holding into consideration.

06:29 This is largely in line with what we had expected.

06:35 I think Sundaram Finance was one name which was there on the radar, but I think it wasn't

06:41 in the liquidity criteria, but we will roll over our expectations with respect to Sundaram

06:48 Finance for the Fed 2024.

06:51 Okay.

06:52 And overall, any expectations from an, I mean, and specifically with IndusInd Bank, how are

07:00 you looking at it?

07:01 If you, I mean, because that was something that was on the cards, but from a performance

07:07 perspective, a good inclusion?

07:09 So, in terms, with respect to private banks, what we are seeing is SPIs have been gradually

07:23 trimming their positions in private banks because this is one of the sectors that is

07:32 overrun by the SPIs.

07:35 Same goes with IndusInd Bank as well.

07:37 I think because of this reason, the inclusion event, the anticipated inclusion of IndusInd

07:46 Bank in the India Standard Index was not getting priced in.

07:51 But like, you know, now that the actual announcement is out, we expect the stock to outperform

07:58 Bank 50 and IndusInd Bank in the run-up to the inclusion event.

08:02 Right.

08:03 And very lastly on FTSE, we spoke about Suzlon, but overall, what's your expectation from

08:09 a FTSE reject perspective?

08:11 So, with respect to, so FTSE will be announcing the changes for the December quarterly review

08:21 on Friday.

08:22 So, our list of expectations include inclusion of Mindfarm, Parma in the All World and All

08:30 Cap Index.

08:31 This is an expectation.

08:32 So, in case, in an event, if our expectation stands out, so mankind should see inclusion

08:42 of $30 million across All Cap and All World Index.

08:47 Right.

08:48 So, I think these are going to be interesting names to watch out for.

08:52 Thank you so much, Sridhar, for joining us on the show and sharing the views so clearly.

08:56 Pacified flows is what is on the cards.

08:59 No deletions is interesting.

09:01 You know, a high conviction inclusion is a Suzlon.

09:05 IDFC is also a good one to watch out for as well as a Tata Motors DBR.

09:09 And next in line will be the FTSE review that all will be eyeing.

09:12 That's all that we have on this session.

09:14 Thanks for watching and lots more lined up on the other side.

09:16 Please stay tuned to BQ Prime.

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