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Thursday, May 13, 2010

REC, Adani and Piramal included in MSCI India Index

MSCI, whose stock market indices are used as benchmarks globally, has included Rural Electrification Company (REC), Piramal Healthcare and Adani Enterprises in the MSCI India Index. This was after a semi-annual review. REC is also one of the three largest additions to the MSCI Emerging Market Index.

The changes, effective from May 26, could lead to an increase in liquidity in these stocks as portfolios of several global funds mirror the index.

According to a release by the New York-based MSCI Inc, the three largest additions to the MSCI Emerging Market Index are Gudang Garam (Indonesia), Lee & Man Paper Manufacturing (China) and Rural Electrification Co (India). In all, 42 securities will be added to and 45 will be deleted from the MSCI Global Standard Indices as part of the “MSCI Equity Indices May 2010 Index Review”.

Institutional dealers say the revision will lead to more institutional participation in the three as many global funds, active and passive, are benchmarked against MSCI indices and mirror the index. While this could not be separately confirmed, reports said the three inclusions in the India index would have a weight of 0.5 per cent each. Further, the weight of Cairn India and ONGC has been changed to 1 per cent and 1.77 per cent, respectively. There was a buzz in the market that Idea Cellular would be excluded from the India index. This, however, did not happen. The MSCI release said there was no exclusion from the India index.

Dealers said passive funds would buy these shares only on the day (May 26) when these changes come into effect. Active funds, meanwhile, could increase exposure to these stocks in the coming days. According to rough estimates, the size of funds tracking MSCI indices is pegged at $50 billion. REC touched a new high of Rs 274.80 today on the back of high volumes. On the Bombay Stock Exchange, more than 5,00,000 shares changed hands, as against the two-week average of 1,33,000 shares. The stock ended the day at Rs 271.90, up 3.7 per cent. The Sensex gained 0.3 per cent and closed at 17,196. Adani Enterprises, however, lost marginal ground to settle at Rs 581.15, and Piramal Healthcare was down 3.8 per cent to Rs 489.80.

India’s weight is down from 11.6 per cent to 11.5 per cent. Adani Enterprises, Piramal Healthcare and REC have a weight of 0.5 per cent each. Idea has a weight of 0.3 per cent in the MSCI. The weight of Cairn India and Oil and Natural Gas Corporation (ONGC) has been changed to one per cent (earlier 0.75) and 1.77 per cent (2.37 earlier), respectively.

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