An upcoming MSCI index rebalancing could direct around 2.3 billion dollars in passive investment flows to Indian equities. The global index provider plans to announce the changes after market close on August 12.
Several Indian stocks are under consideration for inclusion in the MSCI India Standard Index. The adjustments will affect index-linked exchange-traded funds and mutual funds.
The rebalancing is scheduled to become effective for portfolios on August 31.
Indian stock markets saw a sharp selloff on Friday as Sensex and Nifty fell more than 1 percent. The decline was driven by passive fund flows tied to MSCI index reshuffles.
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Foreign investors bought Indian financial stocks worth more than 14,000 crore rupees in the second half of June. The purchases marked their highest level in the sector during that period and turned overseas investors into net buyers of Indian equities.
Global investors cut their holdings in India's financial services sector during the second half of May, though at a slower pace than earlier in the month. They sold shares worth ₹5,181 crore in the period. FPIs stayed net sellers overall despite inflows into other areas.
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India's stock market value has crossed the 5 trillion dollar mark. This development has returned the country to the sixth position globally.