What Is the MSCI Rejig?
The MSCI rejig refers to the periodic review and reshuffling of stock indices managed by Morgan Stanley Capital International (MSCI) — one of the world’s leading index providers. MSCI reviews its indices four times a year — in February, May, August, and November — with any changes typically taking effect at the end of each review month.
During these quarterly reviews, MSCI evaluates listed companies across several parameters to determine their eligibility, inclusion, and weighting within its indices. The goal is to ensure that the indices continue to reflect the most up-to-date market dynamics and remain investable benchmarks for global investors.
The adjustments are based on metrics such as market capitalization, liquidity, trading volumes, and the free float (shares available for public trading). By updating its composition regularly, MSCI keeps its indices aligned with evolving market conditions.
How Are Decisions on Stock Entry and Exit Made?
MSCI follows a systematic process to decide which stocks enter or exit its indices during a rebalance. The key steps include:
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Eligible Universe Screening:
Stocks must meet minimum requirements for size, liquidity, and free-float-adjusted market capitalization to be considered investable.
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Market Capitalization Ranking:
Companies are ranked by their market value. Those meeting the size-segment cutoff are placed in large-cap, mid-cap, or small-cap categories.
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Liquidity Thresholds:
Stocks must achieve minimum average daily traded value levels to ensure they can be easily bought or sold by institutional investors.
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Sector Representation:
MSCI ensures a balanced representation across sectors, aligning each index with its parent or target index methodology.
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Security Weighting and Adjustments:
Once selected, stocks are weighted according to their free-float-adjusted market capitalization (or equally, depending on the index type).
MSCI conducts semi-annual rebalancing reviews in May and November, ensuring index constituents remain aligned with global market standards. Stocks that no longer meet the inclusion criteria are removed (exits), while newly qualified companies are added (entries).
Why Does the MSCI Rejig Matter?
The MSCI rejig holds major significance because of the enormous amount of global capital linked to MSCI indices. As of 2025, roughly USD 18.3 trillion in assets worldwide are benchmarked to MSCI equity indices, including more than USD 2 trillion in exchange-traded funds (ETFs).
Given this scale, even minor adjustments in index composition can trigger large fund flows, impacting individual stock prices and overall market sentiment. That’s why MSCI announcements are closely watched events by investors and analysts alike.
MSCI Rejig in the Indian Context
India’s prominence within MSCI indices has grown substantially over recent years. Its weight in the MSCI Emerging Markets (EM) Index climbed from around 9% in 2021 to over 20% in 2024, before stabilizing near 18–19% in 2025. This reflects the country’s strong equity performance, robust economic growth, and expanding corporate landscape.
As of 2025, India is the second-largest constituent in the MSCI Emerging Markets Index, trailing only China — highlighting its increasing importance in global portfolios.
