The upcoming MSCI Index review in February 2025 is set to trigger significant changes, with several stocks from India poised to enter the MSCI Standard Index. As per a report by Motilal Oswal Financial Services (MOFSL), five stocks—Coforge, One 97 Communications (Paytm), Coromandel International, UNO Minda, and Fortis Healthcare—are top candidates for migration from the MSCI Small Cap Index to the Standard Index. Additionally, GE T&D India and Federal Bank have been identified with medium to low probabilities of inclusion.
Top stocks likely to be added
Coforge is leading the pack with an anticipated inflow of $423 million in passive funds. The company’s consistent performance and growing market capitalization have made it a strong contender for MSCI inclusion. Following closely, Paytm and Coromandel International are expected to attract $197 million and $159 million, respectively. UNO Minda and Fortis Healthcare may secure inflows of $148 million and $249 million. Even the lower-probability entrants, GE T&D India and Federal Bank, could draw significant passive inflows of $177 million and $257 million, respectively.
Important dates for the review
The MSCI review cut-off period spans January 20 to January 31, 2025. During this window, the index provider will monitor stock performances and finalize the inclusions. The official announcement will be made on February 12, 2025, with the changes coming into effect from March 3, 2025.
Hyundai Motor IPO inclusion update
Interestingly, Hyundai Motor India’s potential inclusion remains uncertain. The lock-in period for its IPO ends on January 16, 2025, and its eligibility hinges on updated shareholding data before the review cut-off. If eligible, it could become a notable addition to the MSCI Standard Index.
IndusInd Bank may see weight increase
Apart from new additions, existing index members are also under review for weight adjustments. Notably, IndusInd Bank may see its weight in the MSCI Standard Index double from 0.22% to 0.44%. This increase hinges on a marginal reduction of 0.03% in foreign institutional investor (FII) holdings. If this adjustment materializes, it could drive additional inflows of approximately $200 million into IndusInd Bank shares.
Impact of MSCI index changes
The MSCI Index is a benchmark for global investors, and any changes to its composition directly impact the flow of passive and active investments. Stocks included in the Standard Index often witness a surge in trading volumes and valuations, driven by inflows from index-tracking funds. This rejig, particularly with strong contenders like Coforge and Paytm, could enhance investor confidence in the Indian equity market.
The February 2025 MSCI review is shaping up to be a pivotal event for several Indian stocks. With high-probability inclusions poised to attract substantial inflows and potential weight increases for existing members, the review’s outcome could significantly influence market dynamics in the months to come. Investors will closely watch these developments, as MSCI’s final decision on February 12 could set the tone for Indian equity performance in 2025.
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