Index re-balancing to trigger passive inflows, DRL seen as major gainer

Some $900 mn could flow into domestic stocks due to the GEIS rejig; Dr Reddy's could see inflows of $80 mn and Tata Steel could see outflows of $60 mn due to changes in BSE Sensex

Domestic markets are likely to witness a huge bout of inflows on Friday from passive funds as the rebalancing exercise in major indices. Rejig exercise in both FTSE Global Index Equity Index Series (GEIS) and Sensex takes effect on Friday. 

According to an analysis done by Abhilash Pagaria of Edelweiss, as much as $900 million could flow into domestic stocks due to the GEIS rejig. Separately, Dr Reddy’s could see inflows of $80 million and Tata Steel could see outflows of $60 million due to the changes in the benchmark BSE Sensex. 

According to analysts, L&T, Asian Paints, TCS and Tata Steel are the stocks that could see highest inflows on account of the FTSE rejig. 

Global indices such as FTSE and MSCI are increasing the so-called foreign inclusion factor for domestic stocks after the tweak in overseas shareholding norms has created more legroom for foreign portfolio investors (FPIs). 

“FTSE is expected change India foreign ownership limit in four tranches. The current rebalancing is the second lag and the first leg happened in September 20. Domestic stocks will see a total of $700-900 million worth of inflows. India will witness maximum inflow in Asia Pacific Region,” said Pagaria.