What are the stocks that are being added to the MSCI index and what stocks are being removed? Why is there so much talk about the MSCI additions?

Let me first talk about the MSCI index and its specific role. Morgan Stanley Capital International (MSCI) is the largest provider of country specific indices. Most global investors use this as the benchmark. Now the MSCI Global Standard India Index is undergoing some changes effective from close of 30-November. A total of 7 stocks will be added to the MSCI index while 2 stocks will be remove. The list has already been announced.

The 7 stocks to be added to the MSCI index include Godrej Properties, IRCTC, Mindtree Ltd, Mphasis Ltd, SRF Ltd, Tata Power, Zomato Ltd. On the other hand, the two stocks to be removed from the list are Rural Electrification Corporation and IPCA Laboratories. These stock additions will see inflows of $1.45 billion and the stock deletions will see outflows of around $200 million resulting in net inflows from FPIs of $1.25 billion.

Why is this important? Major participants in Indian markets are passive funds like index funds and index ETFs. They invest through representative indices and MSCI remains the most popular index for over 90% of the global investors. That is why the flows happen. In addition, this would also be normally followed up with inclusion in the FTSE world index too. In addition, brokers, traders and active investors also trade ahead of the shift.