MSCI rejig drives volumes in India stocks amid closing auction-led swings

Mumbai witnessed a significant surge in trading volumes on the National Stock Exchange (NSE) on Monday, as a quarterly MSCI rebalancing drove nearly $4.1 billion of trades during the closing auction window. This marked 40 times the average turnover since the new closing auction was introduced earlier in the month, representing 21% of cash-market volume. The sharp price movements, which underscore the stock-specific volatility triggered by the MSCI index adjustment, were anticipated by market strategists.

The MSCI index adjustment, effective from September 1, added four Indian companies - Laurus Labs, Lenskart, Adani Energy Solutions, and Groww - to its global standard index, while dropping Balkrishna Industries, SBI Cards, and Astral. Additionally, the reshuffle altered the weightings for Reliance Industries and Eternal. Reliance, previously up 0.6% before the auction, saw a decline of 1.6% during the closing session, settling 0.8% lower.

Conversely, Eternal recovered from intraday losses of 3% to close 0.8% higher. Adani Energy fell 10.4%, and SBI Cards rose 0.6%, while Astral lost 0.7%.

Experts attribute the heightened activity to foreign institutional investors, who are more accustomed to the auction process from other global markets, thus mitigating the impact on benchmarks. However, the new system only covers stocks with futures and options, limiting volatility to a select few stocks like Lenskart and Groww.