New MSCI Or­der Puts Stocks into Over­drive

AC­TION TIME NTPC to be the big­gest gainer while HDFC Bank may lose ground

The Economic Times - - Markets + Finance - RA­JESH MASCARENHAS CMP (`) Chg (%)

Shares of In­dian com­pa­nies, whose weigh­tages on the in­flu­en­tial MSCI Emerg­ing Mar­ket In­dex (MSCI) are set to in­crease or de­crease start­ing Mon­day, were in the thick of ac­tiv­ity on Fri­day.

Shares of Hindustan Unilever (HUL), whose weightage on the MSCI in­dex is set to in­crease, surged 7% to .` 600.95 on Fri­day, high­est sin­gle-day gain since July 17 last year with over 1.01 crore shares chang­ing hands com­pared with pre­vi­ous 5-day aver­age trad­ing vol­ume of 30 lakh shares. Changes in MSCI in­dex could trans­late into an in­flow of .` 340 crore into HUL counter. HUL shares, an un­der­per­former in 2014, de­clined 2% since Jan­uary 1 through Thurs­day against 14% surge in Sen­sex.

Shares of Aurobindo Pharma ral­lied as much as 6.5% in trade to hit its fresh 52week high of .` 678.10 on Fri­day. Aurobindo was the only stock which was added to MSCI EM in­dex this time.

Many for­eign in­sti­tu­tional in­vestors (FIIs), mainly ex­change traded funds (ETFs), bench­mark their In­dian portfolios to these in­dices. So, when there is an in­crease or de­crease in weightage, these in­vestors also trim or in­crease their stakes in these stocks ac­cord­ingly, re­sult­ing in more FII in­flows or out­flows.

HDFC Bank fell as much as 4% dur­ing the day be­fore clos­ing at .` 794.10, down 2%, as its weightage on MSCI is set to de­cline fur­ther. In the F&O seg­ment, the HDFC Bank coun- ter saw a record turnover of .` 2,714 crore on Fri­day as many in­vestors un-wound their po­si­tion ahead of the MSCI changes. HDFC Bank, which has been banned by RBI for fur­ther stake in­creases by for­eign in­sti­tu­tional in­vestors (FIIs), will be the big­gest loser be­cause of the MSCI change. Its weightage in the in­dex has been re­duced by 1.5% to 5.4% which will likely to see an out­flow of .` 2,750 crore. “Trades have un­wound their po­si­tions from those stocks which have been neg­a­tively im­pacted due to changes in MSCI EM in­dex whereas they bought in some of the stocks like HUL in an­tic­i­pa­tion of FII in­flow,” said Rikesh Parikh, VP-mar­kets strat­egy and eq­ui­ties, Motilal Oswal Fi­nan­cial Ser­vices. In­ter­na­tional in­dex com­piler MSCI in the semi-an­nual in­dex re­view has made changes in its con­stituents for the MSCI Emerg­ing Mar­ket in­dex, which will be ef­fec­tive Mon­day, June 2, 2014.

Ac­cord­ingly, weightage of seven stocks – HUL, NTPC, Sun Pharma, Dr Reddy’s, M&M, Ideal Cel­lu­lar and Sesa Ster­lite – will in­crease while HDFC Bank In­fosys, Bank of Bar­oda and Power Grid will come down.

In­dia’s largest power com­pany NTPC gained 5% to .` 159.85 as the com­pany will be the big­gest ben­e­fi­ciary of the MSCI change where its FII hold­ing could go up by 0.3%, which is likely to trans­late into an in­flow of .` 338 crore. FIIs held 9.33% stake in the com­pany as on March 31, 2014.

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