MSCI February Rebalance: AB Capital, L&T Finance Added To Flagship Global Standard Index In Latest Rejig, IRCTC Excluded

MSCI February Rebalance: MSCI will add non-banking financial companies (NBFCs) Aditya Birla Capital and L&T Finance to its widely tracked Global Standard Index and remove Indian Railway Catering and Tourism Corporation (IRCTC), as part of its latest periodic reshuffle.

The changes will take effect from the close of trading on February 27.

Meanwhile, MSCI has also raised AU Small Finance Bank’s index weight after adjusting its free-float market capitalisation.

After the latest review, the number of Indian constituents in the MSCI Global Standard Index will increase to 165 from 164, though India’s total index weight will stay unchanged at 14.1 per cent.

Aditya Birla Capital is the financial services holding arm of the Aditya Birla Group. Through its subsidiaries and joint ventures, the NBFC operates across lending businesses such as housing, personal and SME loans, asset management through mutual funds and wealth platforms, life and health insurance, and digital payments and other financial services.

L&T Finance is the financial services arm of the Larsen & Toubro (L&T) Group, one of India’s largest engineering and infrastructure conglomerates. Headquartered in Mumbai, the company caters to individual borrowers and small businesses rather than large corporates. The NBFC has a strong presence in rural and semi-urban markets, where access to formal credit are relatively limited.

The Reserve Bank of India (RBI) classifies both the companies as “upper-layer” NBFC, a category meant for large and systemically important NBFCs that require tighter regulatory supervision due to their size and impact on the financial system.

How Will MSCI Rejig Impact Passive Inflows and Outflows

MSCI indices act as reference benchmarks for large passive funds, so the inclusions are likely to see fresh capital inflows, while exclusions could see outflows.

Brokerage firm Nuvama pegs potential passive inflows at $257 million for Aditya Birla Capital and $238 million for L&T Finance, whereas IRCTC is expected to face outflows of roughly $141.6 million.

MSCI Small Cap Index Rejig

MSCI also reduced the number of Indian stocks in its Small Cap Index to 480 from 508 in the latest review. 34 companies including Gokaldas Exports, Dilip Buildcon, JK Lakshmi Cement, VRL Logistics, Ashoka Buildcon, Zaggle Prepaid, Sterlite Technologies, and KNR Constructions among others were removed.

On the other hand, seven stocks including Premier Energies, National Securities Depository, Emcure Pharmaceuticals, JSW Cement, Ashapura Minechem, Canara HSBC Life Insurance and Thyrocare Technologies were included in the Small Cap Index. Some stocks, such as Akzo Nobel India, saw an increase in weight due to float adjustment.