The MSCI index reshuffle is set to put several Indian stocks in focus today, with investors expected to make portfolio adjustments ahead of the revised weightages taking effect from 1 September. The changes announced on 13 August will be reflected in trades at Monday’s close, potentially driving a surge in trading volume and stock-specific volatility, particularly during the final minutes of the session.
According to Reuters report, traders said concentrated buying and selling could trigger sharp price movements, particularly in stocks with relatively low liquidity.
The MSCI rebalancing will be the first major test of India’s new closing auction session (CAS), according to Arun Kejriwal, founder of Kejriwal Research and Investment Services.
“This MSCI rebalance is the first real litmus test for the CAS. We could again see some ‘chaos’ in individual stocks,” Kejriwal said, according to Reuters.
Introduced on August 3, the CAS is a roughly 20-minute auction in which buy and sell orders are matched to determine a stock’s official closing price. Similar closing auction mechanisms are used in several global and Asian markets, including China, Taiwan, Hong Kong and South Korea.
The new system replaced the earlier methodology, under which a stock’s closing price was determined by the average price of trades executed in the final 30 minutes of continuous trading.
Four stocks added to MSCI index
The latest MSCI rebalancing will add four Indian companies — Laurus Labs, Lenskart, Adani Energy Solutions and Groww — while Balkrishna Industries, SBI Cards and Astral will be removed from the index.
The reshuffle will also lower the weight of heavyweight Reliance Industries while increasing the weight of Adani Enterprises.
