Global index inclusion to help IndusInd as stock faces Sensex, Nifty ouster

Lender's stock price has plunged due to concerns around losses on account of its derivatives portfolio

Private sector lender IndusInd Bank is likely to be deleted from the benchmark Sensex and Nifty indices following a 30 per cent drop in its stock price this year due to concerns about losses on account of its derivatives portfolio. However, an increase in foreign portfolio investor (FPI) investment “room” will see IndusInd getting added to a global index over time. This will cushion the blow from the selling that will be triggered on account of its ouster from the Sensex and Nifty.

 

The next rebalance for BSE indices is scheduled for June, while the review period ends April 31. Meanwhile, the next rebalance for NSE indices will be in September, with the review period ending July 31.

 

“Existing constituents ranked 39 or below on average free float market cap are deleted from the index to make place for higher ranked stocks. Indusind Bank is ranked 57th and is a sure deletion. Deletion from the BSE Sensex index will require passive trackers to sell 15.5 million shares at the close on June 20,” said Brian Freitas, an insight provider of Periscope Analytics who publishes on Smartkarma.com.

 

Freitas had identified IndusInd as a deletion candidate in February, before the company’s current turmoil.

 

“We see Indusind Bank as a high probability deletion from the index at the September rebalance. Deletion from the Nifty Index will require passive trackers to sell 27.4 million shares at the close on September 29,” he added.

 

On the positive side, FPI selling of IndusInd Bank has led to an increase in foreign investments and will result in the stock getting added to a global index, resulting in staggered passive inflows.

 

“Following an increase in foreign room to more than 20 per cent, Indusind Bank will be added to the index at the close on March 21, but at a 5 per cent float. That float will increase by 10 per cent at subsequent rebalances till the foreign ownership limit is reached,” said Freitas.

 

“In total, passives tracking the index will buy 22.5 million shares from next week to mid-December 2026,” he added.

 

At the current stock price, IndusInd will see passive selling to the tune of Rs 1,042 crore and Rs 1,842 crore on account of its removal from the Sensex and the Nifty. On the other hand, it will attract inflows of Rs 1,512 crore due to its inclusion in the global index.

 

However, “there will be net selling in the stock further adding downward pressure over the next few months,” said Freitas.