The quarterly index rebalance in major indices like the Nifty and the Nifty Bank will be effective from September 30, which means the adjustments will take place on September 29.
The act of rebalancing comes after an index rejig which can be done in various methods by adding new stock to the index, removing a particular stock from the index, or even increasing or decreasing the weightage of existing stock in the index.
According to Edelweiss, there will be a buy inflow in stocks like SBI of close to $100 million, and in Axis Bank close to $58 million as far as the Nifty Bank index is concerned. However, at the same time, there will be outflows in four bank stocks— HDFC Bank (close to $82 million), Bandhan Bank and Federal Bank (close to $10 million), and IndusInd Bank (close to $40 million).
Also Read | Explained: The what, why and how of Index rejigs
There will be a few changes in the CPSE Index as well. Power Grid shall see an inflow of close to $17. 50 million, while there is going to be buying in NHPC of close to $2.2 million, and in NTPC close to $5 million.
However, in terms of outflows in the CPSE Index, the biggest impact will be on ONGC, which shall witness an outflow of $22 million, according to Edelweiss’ note.
Speaking of overall Nifty, there is going to be one big change— HDFC Life. The weight of HDFC Life is likely to go up, which will lead to an inflow of close to $23 million in the stock.
Meanwhile, Edelweiss expects one addition and one deletion in the IT index. L&T Technologies is likely to get added with an inflow of $6.5 million whereas Oracle Financial is likely to be deleted, it said. If that has to happen, that stock is going to see an outflow of close to $20 million.
So September 29 is the day when there will be many index changes and hence, the outperformance in CPSE stocks in today's trading.
Index rejigs are a key event for the market because they help the market participants to gauge the direction in which the funds are moving, according to an institutional sales trader at a domestic brokerage firm.
CNBC-TV18’s Nimesh Shah discusses some of the key changes that are lined up.