- The MSCI India index rebalancing takes effect September 1, with Laurus Labs, Lenskart, and Adani Energy entering the index, and estimated $1.3 billion in passive flows expected.
- Stocks facing major inflows and outflows from the MSCI India index rebalancing showed mixed movements on Monday, with traders watching the closing auction session (CAS) as changes take effect from September 1.
- Eternal shares fell to a day low of Rs 323.60 on Monday, as investors positioned ahead of the MSCI index rebalancing due later today.
- Ather Energy shares rose for the fourth consecutive session on Monday, gaining 4 percent to hit a fresh high of Rs 1,679 after the launch of its new electric scooter, Konarc, in Bengaluru on Saturday.
- The rebalancing is the first major MSCI reshuffle since SEBI introduced the Closing Auction Session on August 3, making Monday an important test for the new mechanism.
- The Closing Auction System was introduced by SEBI on August 3, and the upcoming rebalancing is a significant test for this new mechanism.
- Laurus Labs is expected to be the biggest beneficiary with estimated inflows of $598 million, while Lenskart could attract $352 million and Adani Energy around $310 million.
- The concern for passive funds is whether the new closing auction system has enough liquidity to execute buy/sell without causing sharp price dislocations.
MSCI's rebalancing, effective September 1, is poised to reshape the Indian stock landscape, with Eternal expected to see a weight increase from 0.6% to 1.1%, potentially attracting $674 million in inflows. This shift is part of a broader $1.3 billion market adjustment.12345
Eternal's shares dipped to a low of Rs 323.60 on Monday, attributed to investor positioning ahead of the index change, despite the company's strong fundamentals, including a 20% growth in net order value for its food delivery arm and an impressive 86% growth for its quick commerce business, Blinkit.
Meanwhile, Ather Energy shares surged to a record high of Rs 1,679, marking a 16% increase over four sessions, following the launch of its new electric scooter, Konarc. The scooter, priced at Rs 99,999, is expected to enhance Ather's market presence, with a target price of Rs 2,200 set by Emkay Global, indicating a potential 36% upside.6
The rebalancing also includes new entrants like Laurus Labs and Lenskart Solutions, while stocks like Balkrishna Industries and SBI Cards face removal, leading to estimated outflows of $169 million and $143 million, respectively. The new Closing Auction Session (CAS) is being tested for liquidity, with concerns about its ability to handle the expected trading volume.791011
Experts warn that if liquidity remains low, passive funds may need to execute orders during regular trading hours, potentially affecting stock prices.
“The rebalance could generate around $5 billion in trading turnover, with roughly $4 billion passing through the CAS window—almost 30 times the typical daily auction turnover. Motilal Oswal's Chandan Taparia warns liquidity has been missing since CAS was introduced, questioning if it can absorb the MSCI flows.”
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