Stocks dancing to MSCI tunes

The MSCI inclusion and expulsion is playing on the stocks concerned. Those included – Ashok Leyland, Cadila Healthcare, Maruti and Tata Motor DVR are totally in the green. While those excluded – DLF and Oil India are, not surprisingly, down in the red.

The MSCI made some changes in the mid and small cap shares too and those also have moved accordingly – thumbs up to those in and down to those booted out.

So what is the all-powerful instrument MSCI that it has the potent to take scrips to lifetime highs and lows? Yes, powerful it is. The Morgan Stanley Capital International Index or more popularly recognized as the MSCI Index reclassifies its indices right across the world. A quarterly exercise, in India specifically, it is watched with great eagerness.

This index in a nutshell gives you the 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.