The Indian stock market took hit on Friday,with benchmark indices dropping about 1.5% after the latest MSCI Global Standard index rebalancing. The BSE’s Sensex fell by 1,092.05 points to finish at 74,775.74,while the NSE’s Nifty 50 index closed down 1.5% at 23,547.75.
This decline came as the index adjustments slightly reduced India's weight from 12.4% to 12.3%. Big names like Hindustan Unilever, Bajaj Finance,and Tata Consultancy Services (TCS) saw their weightages cut,which is expected to lead to passive outflows of between $140 million and $204 million for these stocks, according to IIFL Capital.
As the rebalancing took hold,volatility spiked, especially in the last hours of trading. Siddharth Khemka, head of research at Motilal Oswal Financial Services,said pressure grew as investors reshuffled their portfolios in light of the index changes. “The MSCI rebalancing is set to spark heavy trading during the closing auction session,” he noted,stressing the high trading volumes and sharp price shifts.
New additions to the MSCI Global Standard index included Federal Bank,Multi Commodity Exchange of India,National Aluminium, and Indian Bank. These stocks are expected to draw inflows of between $209 million and $491 million. Still, overall rebalancing is likely to create passive outflows of $136 million to $281 million from stocks that got removed from the index.
In all, 27 stocks are expected to see outflows of up to $20 million, while 16 stocks might face outflows between $30 million and $50 million. Eight stocks could see outflows ranging from $50 million to $80 million. These index changes are enough to put short-term pressure on market as global investors adjust their holdings .
Even with India's weight on the index remaining stable,such rebalancing events usually trigger quick market reactions. The MSCI Global Standard index is a key benchmark for global investors,so its adjustments can significantly impact stock flows and market performance.
