MSCI expected to rejig global indices today; top brokerages pick stocks that may gain most

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With the MSCI expected to rebalance its indices later today, a wide range of stocks have been coming up in various recommendations by major brokerage and research firms. The change in Indices could also see India’s investability weightage increase in MSCI’s global indices, bringing in billions of dollars in foreign inflows. The stocks that could be included in MSCI India range from pharma majors to consumer giants and engineering firms. More clarity will only come once MSCI puts the names out, however here are all that has been predicted so far by leading brokerage firms.

Morgan Stanley: Global brokerage and research firm in a note, soon after India changed the foreing investment limit, said that it is expecting massive inflows once the MSCI takes note of the initiative taken by the Indian government. MSCI India’s weightage in emerging markets could rise up to 55 basis points to inch up to 8.1% from the current 7.6%, resulting in passive inflows of over $1.4 billion (about Rs 10,000 crore) and active inflows of $5.7 billion (about Rs 43,000 crore), said a research report by Morgan Stanley.  L&T, Asian Paints, Bajaj Finance, Nestle and Divis’s Lab are the stocks that Morgan Stanley expects to benefit the most if India’s weightage increases. “On a relative basis, large cap stocks such as RIL, HDFC, and Infosys are likely to see the most reduction in weights given the upward rebalancing of beneficiaries,” Morgan Stanley research said.

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Motilal Oswal: Kotak Mahindra Bank could be the top beneficiary if included in the index, according to Motilal Oswal. The brokerage and research firm expects as much as $1.5 billion in terms of foreign flows towards Kotak Mahindra Bank. Torrent Pharma, Biocon, Indraprastha Gas are the other stocks that Motilal Oswal has predicted to be included in the index. Tata Power, Mahindra and Mahindra Financial Services Limited, and Ashok Leyland  could be excluded in the rejig.

ICICI Direct: Although ICICI Direct research has not speculated on the change in India’s weightage in the upcoming rebalancing but it expects certain stocks to be included in the index. ICICI Direct has four predictions for inclusion and is expecting the exclusion of two other stocks. Tata Consumer Products, Biocon, Indraprastha Gas Ltd and Torrent Pharma are expected to be a part of MSCI India while Tata Power and Mahindra & Mahindra Finance Services Limited could be excluded, according to ICICI Direct. “Currently, with 84 constituents, the index covers ~85% of the Indian equity universe. Sectorally, financial services has the highest weightage in the index followed by the technology space,” the research firm said.

Emkay Global: The brokerage firm is expecting a net $246 million of foreign fund inflows post the May rebalancing. With the change in India’s weightage on various MSCI indexes, the stocks that could be included in the MSCI India index include — Tata Consumer, Torrent Pharma, Jubilant Food, Biocon, Alkem Lab, and Ipca Labs, said a research report. Benchmark funds could see net inflows to the tune of $246 million if the change is made in the May rebalancing, brokerage and research firm Emkay Global said. Bharti Infratel, Shriram Transport, Mahindra & Mahindra Finance Services Limited and Tata Power could exit owing to the low foreign investment headroom.

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