MSCI India Index Rebalancing: Updated List of Companies Added and Removed

MSCI Inc, a prominent provider of essential decision support tools and services for the global investment community, has disclosed the outcomes of the May 2023 Index Review for various MSCI Equity Indices. These indices include the MSCI Global Standard, MSCI Global Small Cap, and MSCI Micro Cap Indexes, as well as the MSCI Global Value and Growth Indexes.

MSCI conducts quarterly reviews and semi-annual rebalancing for each index within its comprehensive family. Skilled analysts at MSCI carefully evaluate and make necessary adjustments to the composition of these indexes. Their objective is to ensure that each index continues to serve as a reliable benchmark for the respective market it represents, effectively incorporating new stock additions and removals as required.

The MSCI Indian Index, which consists of the MSCI India Domestic Index and the MSCI Indian Domestic Small Cap Index, will be rebalanced today after the market closes.

The MSCI India Domestic Index is specifically created to gauge the performance of the large and mid-cap sectors within the Indian domestic market. Encompassing 114 constituents, the index provides coverage for approximately 85% of the Indian equity universe.

MSCI India Domestic Index outperformed MSCI Emerging Markets Index and has given a Gross Annualized return of 22.3% and 11.11% in the last 3 years and 5 years, respectively.

The top 10 constituents of this Index are Reliance Industries, HDFC, ICICI Bank, Infosys, TCS, Hindustan Unilever India Ltd, Axis Bank, Bharti Airtel, Bajaj Finance, and Larsen & Toubro Ltd.

Here are the companies that will be added and removed from both Index:

MSCI INDIA DOMESTIC INDEX: 

The MSCI India Small Cap Index is specifically created to evaluate the performance of the small-cap segment within the Indian market. With a substantial representation of 408 constituents, this index encompasses approximately 14% of the India equity universe’s free float-adjusted market capitalization.

MSCI India Small Cap Index outperformed MSCI Emerging Markets Small Cap Index and has given a Gross Annualized return of 33.57% and 8.72% in the last 3 years and 5 years, respectively.

Top 10 constituents of this Index are Max Healthcare, Persistent System, Ashok Leyland, Federal Bank, Cummins India, IDFC First Bank, APL Apollo Tubes, Astral, Supreme Industries Ltd and Voltas Ltd.

Here are the companies that will be added and removed from Index:

MSCI INDIA DOMESTIC SMALL CAP INDEX 

MSCI conducts quarterly reviews and semi-annual rebalancing for each index within its comprehensive family. When the MSCI Index rebalances, ETFs that track those indices are required to adjust their portfolios based on the latest rebalancing index provided by MSCI. As a result, there is a flow of foreign capital into and out of countries due to these passive adjustments.

Foreign capital flows are notably influenced by the inclusion or exclusion of securities during the rebalancing process. Securities that are included in the index attract foreign capital, while securities that are removed experience a decrease in foreign capital. Additionally, the increased stability provided by the index also appeals to active funds and domestic investors, causing prices to rise for the included securities and decline for those that are removed or have their weight reduced in the index.