Bank Nifty index likely to see a churn worth $186 million on Friday

The Bank Nifty index, a gauge for the performance of banking stocks, could see a churn worth $186 million (Rs 1,345 crore) on Friday. This is on account of a change in weighting of its components.

The Bank Nifty index follows a free-float market capitalisation methodology to determine weighting of underlying stocks. The index provider adjusts weight of stocks in case of any change in the equity base or float factors. For instance, Punjab National Bank will see its weighting increase by nearly 30 basis points (bps) as its free-float has gone up following a qualified institutional placement (QIP). An analysis done by Sriram Velayudhan, vice president at IIFL Securities, shows that eight stocks will see their weighting increase.

Meanwhile, State Bank of India and Axis Bank will see reduction in their weighting by 79 bps and 171 bps, respectively, which will lead to selling by passive funds estimated at $28 million and $60 million, respectively. The Bank Nifty is also one of the most traded derivatives index.