Bharti Infratel, Bharat Forge may be added to ETF buying list

November rebalancing to impact seven stocks, says a report by Kotak Institutional Equities

Bharti Infratel and Bharat Forge are likely to be added to the exchange-traded funds tracked by overseas investors’ buying list, says a report by Kotak Institutional Equities.

Bharti Infratel will qualify due to reduction in promoter holding. Bharat Forge now meets the minimum size requirement. Kotak predicts Bharti might see buying worth $49 million (about Rs 300 crore) and Bharat Forge could see inflows of $36 million (Rs 220 crore) this month. “The upcoming ETF rebalancing could pose liquidity shocks for a few stocks…Bharat Forge and Bharti Infratel could be additions to the ‘passive’ buying list,” says a note by Kotak Institutional.

Shares of Bharat Forge on Wednesday gained nearly four per cent to Rs 844. That of Bharti Infratel declined about three per cent. Maruti Suzuki, which recently increased the foreign institutional investor (FII) investment limit, and Asian Paints, which saw an increase in free-float market capitalisation, could also see some ETF buying.

The board of Maruti Suzuki has proposed to increase the FII buying limit from 24 per cent to 40 per cent. The Reserve Bank of India is yet to notify the higher limit and hence, the stock is unlikely to see changes in the November rebalancing.

Also, Infosys, which has proposed to reclassify its promoters as ordinary shareholders, could see buying interest whenever its free-float market capitalisation increases.

Meanwhile, HDFC Bank, which hasn’t yet got approval from the Foreign Investment Promotion Board (FIPB) to increase its FII holding, faces the risk of expulsion, says the report by Kotak. M&M Financial Services and Godrej Consumer Products, which have seen a decline in headroom for FII buying, could come under selling pressure.

MSCI and FTSE are the major global index providers tracked by most foreign investors. ETFs have to alter their holdings whenever the index providers rejig the index weights.