Why you should track ABB India, Tube Investment, Varun Beverages, TVS Motor & Bajaj Holdings

ABB India, Tube Investment, Varun Beverages, TVS Motor and Bajaj Holdings & Investment are five stocks, which could be on investor radar ahead of MSCI’s November rejig. Nuvama Institutional Equities (erstwhile Edelweiss) sees high chances of these five stocks to be included in MSCI Standard Index. Indraprastha Gas, on the other hand, has a fair chance of being excluded, the brokerage said.

The announcements would be made on November 11, early morning as per IST. The adjustment date will be November 30 while the effective date would be December 1, Nuvama said.

“It is quite evident that most of the gains can only be made through pre-emptive bets, while post-announcement until the next few months, the stocks tend to languish or trade under pressure,” Nuvama Institutional Equities said in a note.

Why to track?

Nuvama Institutional Equities said three months prior to the announcement, the stocks have gained on an average by 41 per cent, 86 per cent of the time. Excluding Adani group stocks, the average return is 20 per cent, it said. “Similarly, the positive hit ratio is also quite favourable, two months and one month prior to the official announcement,” it said.

Announcement-to-adjustment date performance

The brokerage noted that the included stocks largely languish or see lower single-digit gains during from announcement date to adjustment date.
“On the adjustment day, 52 per cent of the time stocks have settled flat while 48 per cent of the time they closed in the red, indicating the higher rebalance volume is matched by the sell flow of hedge fund and event traders,” it said.

Post adjustment day performance

One month and two months after the rebalance, on an average, 60 per cent of the times, stocks have settled with losses, Nuvama said.

“Baring Adani Group of stocks, most of the other inclusion names have traded in a narrow range up until six months post-rebalance,” it said.

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