Tipping Point: Why is a stock discarded from an index?

An investor who builds a portfolio of discarded stocks buys them at lower prices

Most indices in India are weighted by market capitalisation. If the market cap of a stock falls and that of another rises, the former is discarded and the latter is included in the index.  

Why does a portfolio comprising index discards outperform the index? 

Studies have found that a portfolio of index discards beats the index. When it is announced that a stock will join an index, it attracts investors' attention and they buy it.

Many institutions have exchange-traded and index funds. They invest in the stock when it is included in the index, driving its price up. By the time the