Epicentre of change: Nifty indices rebalance to set the ground moving

The rebalancing of the Nifty 50 and Nifty Next 50 indices is expected to drive a cumulative churn of over Rs 22,000 crore as index funds and exchange-traded funds tracking these indices adjust their holdings.

 

As part of its semi-annual review, NSE Indices announced on Friday the removal of Britannia and Bharat Petroleum Corporation from the flagship Nifty 50 index. This will lead to selling pressure of over Rs 2,000 crore for each stock.

 

Meanwhile, Jio Financial Services and Zomato, which are being added to the Nifty 50, will see buying inflows of Rs 3,128 crore and Rs 6,525 crore, respectively. However, net inflows will be slightly lower due to liquidation by passive trackers following their removal from the Next 50 index.

 

The Nifty Next 50 index will also add five stocks — Indian Hotels Company, CG Power and Industrial Solutions, Hyundai Motor India, Bajaj Housing Finance, and Swiggy. These additions are expected to attract passive flows ranging from Rs 100 crore to Rs 950 crore, according to an analysis by IIFL Institutional Equities. 

 

The stocks being removed from the Next 50 index to accommodate these new entries are mostly state-owned enterprises. NHPC, Indian Railway Catering and Tourism Corporation, Adani Total Gas, Union Bank of India, and Bharat Heavy Electricals are expected to face selling pressure of about Rs 300 crore each.

 

Experts said that given the recent market decline, stocks added to the two indices may see gains leading up to the rebalancing.

 

The changes will take effect on March 28, with portfolio adjustments expected before the market closes on March 27.