MSCI India Index Rebalancing And Returns

Retail investors who do not understand equity markets very well and neither have a view on sectoral funds, thematic funds etc. can ideally invest in index funds.

Index investing is the most simple way of taking exposure to equity markets, often referred to as passive investing. When you invest in stocks forming an Index assigning funds in stocks on the basis of the weightage they carry in the underlying index, then your investment will mimic the returns of the index. Retail investors who do not understand equity markets very well and neither have a view on sectoral funds, thematic funds etc. can ideally invest in index funds. Index funds are fairly diversified, entail low transaction costs, are relatively low risk and earn returns which replicate the returns of the index. Index investing is passive investing, where the fund manager's role is just to build a portfolio similar to the index in terms of composition and stock weightages. So technically, he is not obliged to beat the underlying index.

In India, the Nifty and the Sensex are the bellwether equity indices, but MSCI India Domestic is a globally tracked index where MSCI is the world’s largest compiler (Morgan Stanley Capital International). Global investors who are keen to invest in India through Index funds would be more comfortable investing in MSCI India Domestic or invest in stocks which are part of MSCI INDIA.

On November 7, 2019 MSCI made announcements of some changes in the composition of the MSCI India domestic Index and included Berger Paints, DLF, HDFC AMC, ICICI Prudential Life Insurance Company, Indraprastha Gas, Info Edge, SBI Life, Siemens India. Those excluded from the index were BHEL, Glenmark Pharmaceuticals, Indiabulls Housing Finance, L&T Finance, Vodafone Idea and Yes Bank. Stocks which were included in the Index like HDFC AMC, DLF, Indraprastha gas etc. rallied immediately.