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Which Indian stocks will benefit from Russia’s withdrawal from major global indices?

Which Indian stocks will benefit from Russia’s withdrawal from major global indices?

Published on 04 March 2022 .Views 164 .Comments 0
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In this article, we will be going to discuss about the latest updates in the 2 major indices- the FTSE All-World India Index and the MSCI Emerging Index wherein there is some inclusion of any company and as well as an increase in the weightage of some stocks in one of the indices. So, let’s talk in brief about both the companies and the change in the following indices in this article.

Stocks to be included in FTSE All-World India Index:

  • Financial Times Stock Exchange or FTSE creates a research-based portfolio index which is then being followed by institutional investors. Hence, it is a kind of passive investing.
  • The FTSE All-World India Index will include 2 stocks- Relaxo Footwears and Tube Investments of India Limited from 17th March 2022.

1) Tube Investments of India Limited:

  • Tube Investments of India Limited (TIIL) is one of the stocks which will be included in the FTSE All-World India Index.
  • If TIIL is included in the FTSE All-World Index Index then it could witness an inflow of $35 Million or around Rs. 262 Cr. in the form of passive inflow.
  • The Market Capitalization of TIIL is around Rs. 29,000 Cr. In the shareholding pattern, the promoters are holding a stake of around 46%. And, there is high free-float market capitalization.
  • TIIL is a Murugappa Group company that specializes in engineering, bicycles, metal-formed products, and chains.
  • The returns ratios- ROCE & ROE are above the range of 14% which looks good. The Debt to Equity Ratio of the company is around 0.57% and the interest coverage ratio is at around 14 times.

2) Relaxo Footwears:

  • Relaxo Footwears is another stock that will be included in the FTSE All-World India Index.
  • It is generally observed that when the Per Capita Income of a country crosses the mark of $2,000 or ~Rs. 1,50,000, the footwear industry performs well.
  • On the inclusion in the index, the stock can witness a passive inflow of $20 million or around Rs. 150 Cr.
  • The Market Capitalization of TIIL is around Rs. 30,000 Cr. In the shareholding pattern, the promoters are holding a stake of around 74%, but here is high free-float market capitalization.
  • The ROE and ROCE figure of Relaxo footwear is 20% and 26% respectively as of FY21.
  • The company is debt-free and has a high interest-coverage ratio.

Stocks to be included in MSCI Emerging India Index:

  • Morgan Stanley Capital International (MSCI) Emerging Market Index was launched in 1988 including 10 countries with a weight of about 0.9% in the MSCI ACWI Index. Currently, it captures 25 countries across the globe and has a weight of 12% in the MSCI ACWI Index.
  • As per the latest update- 2 stocks: Reliance Industries Limited and Infosys
  • MSCI has said that removing Russia from indices is a natural next step as nations and economies are imposing sanctions on Russia due to the ongoing tension between Russia and Ukraine.
  • Russia's weightage in the Emerging Market (EM) index is around 3.24%. Passive Funds inflow of worth $30 billion or around Rs. 2.25 Lakh Cr. goes into this MSCI EM Index. Here, Russia's weightage was worth around $1 billion or Rs. 7,500 Cr., but now post-exclusion from the index, there could be an outflow of these funds from the Russian markets.
  • India’s weightage in the MSCI EM index is 12.54% and a proportionate increase in the allocation will also lead to some increase in India’s weightage.
  • The weightage of Reliance Industries & Infosys in the MSCI EM Index before the latest update is around 1.18% and 1.03% respectively.
  • The total outflow of $1 billion or Rs. 7,500 Cr. from the Russian market will also lead to an inflow of around $100-$150 or Rs. 750 Cr.- Rs. 1,125 Cr. in the Indian market, where Reliance and Infosys can be 2 direct beneficiaries.
  • Russia’s weightage in MSCI World Index is around 0.3%.

What Should Investors Do?

The inclusion date of these Relaxo Footwears and TIIL in the FTSE All-World India index is fixed at 17th March 2022. And hence, before the inclusion of these stocks in the indices the active investors can also show their participation by following the index. Here, one should carefully assess the business and should invest only upon a thorough study of the business. In MSCI EM Index, it will be important to see whether Russia will be removed from the indices, but it looks like Reliance Industries and Infosys will come out to be beneficiary stocks if it happens so. Do follow due diligence before making any investment decisions.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

Originally Published On: https://blog.investyadnya.in/which-indian-stocks-will-benefits-from-russias-withdrawal-from-major-global-indices/

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