New MSCI Order Puts Stocks into Overdrive
ACTION TIME NTPC to be the biggest gainer while HDFC Bank may lose ground
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.