MSCI Index spurs action

Today, action can be seen in stocks, which have been added and deleted from the MSCI Index. Godrej Properties, IRCTC, Mindtree, Mphasis, SRF, Tata Power and Zomato have been added to the index.

Two stocks – IPCA Labs and REC have been deleted.

These stocks are seeing a lot of action as the stocks selected in the MSCI gives one a synopsis of almost all stocks tracked by majority of the FIIs. The index is just like the others which we have – Sensex or S&P or Dow Jones but amongst all, MSCI is the most widely used and followed. Most of the FIIs buy into stocks based on the composition of the MSCI Index. These FIIs even assign weightage to its sectoral buying/selling based on that followed by MSCI. In a way, one can say that the FIIs follow the MSCI blindly – it’s like all the research is done by MSCI and the FIIs just follow. Thus the moment the MSCI announces a rejig, there is a major spike up or fall. The moment MSCI announces an addition, the FIIs also make adjustments to their portfolios accordingly; ditto for deletion from MSCI.