MSCI Rebalancing Threatens to Turn ‘Messy’ in New Indian Auction
- India's new closing auction system will be tested by MSCI Inc.'s quarterly index rebalancing, which is expected to generate about $5 billion in trading, with $4 billion passing through the auction session, far exceeding its usual turnover levels.
- The Securities and Exchange Board of India implemented the auction to reduce tracking error for passive funds and align with global standards, but it has faced scrutiny and concerns over sharp price swings, liquidity issues, and market manipulation.
- MSCI added four Indian stocks and removed three in its latest index review; changes include a reduction in Reliance Industries Ltd.'s weight, which may cause approximately $500 million in outflows, primarily executed through the auction.
- Market participants worry that auction liquidity is insufficient for large institutional orders, especially for less-traded stocks, with some trades likely executed outside the auction to avoid price impacts; the system's effectiveness depends on institutional confidence and participation.
12 Articles
12 Articles
MSCI Rejig: Adani Energy, Lenskart, Groww to see inflows; Reliance weight trimmed
The MSCI index reshuffle will highlight several Indian stocks as portfolio adjustments take effect on September 1. This could lead to increased trading volume and volatility, especially in low liquidity stocks, marking the first major test of India's new closing auction system.
Indian shares fell in early trade on Monday as higher crude prices and fears of U.S. rate hikes weighed on market sentiment, as investors braced for potential volatility from an MSCI index rejig and the country's new stock closing system.
MSCI rebalancing on Monday: Adani Energy, Groww set for big inflows; RIL, Jio Financial may face outflows
MSCIs latest rebalancing is set to drive heightened trading activity in several Indian stocks on Monday, with revised weights taking effect from September 1. The final 30 minutes of Mondays session could see significant activity as investors adjust positions. According to Nuvama Alternative and Quantitative Research, the changes include index additions and exclusions, along with weight revisions across several stocks.
India’s New Closing Auction Faces First Major MSCI Test
A quarterly MSCI index reshuffle triggered about $4.1 billion in trades on India’s National Stock Exchange (NSE) during Monday’s closing auction, providing the first major test of the country’s newly introduced stock-closing pricing mechanism. The exchange said turnover during the roughly 20-minute auction was nearly 40 times the average since the system was launched earlier this month and accounted for 21% of cash-market volume. The surge was d…
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