Win some, lose some: Nifty indices rebalancing likely to trigger churn

Several frontline stocks are expected to see sizeable churn from passive funds as they realign their portfolios following the rebalancing in the Nifty-branded indices on March 30. Tata Consumer Products, which will be added to the benchmark Nifty50, will likely see the biggest inflow at $101 million, followed by AU Small Finance Bank, to be added to the Bank Nifty.

According to an analysis by IIFL Alternative Research, funds with assets of $17.3 billion are pegged to the Nifty50, while the Bank Nifty is tracked by funds with assets of $3.2 billion.

The Nifty Next 50 index, which comprises the top firms outside the Nifty50, is tracked by funds with assets of $500 million. The index will see inclusion and exclusion of seven stocks. These stocks may see inflows and outflows in the $3.6 million-$18.3 million range.

Besides stocks that are included or excluded, several other stocks are expected to see churn on account of increase or decrease in their weighting. This will be on account of an increase in free-float due to factors, such as divestment by promoters.

Nifty stocks whose weighting will be adjusted upwards are BPCL, HDFC Life, Axis Bank and Bharti Airtel. On the other hand, stocks, including Reliance Industries, TCS and Infosys, will see marginal reduction in their weighting, as per a note by IIFL Alternative Research.