IndusInd Bank, a private sector lender, is expected to be removed from the benchmark Sensex and Nifty indices after its stock price has dropped by 30% this year due to concerns about losses on its derivatives portfolio.
However, as foreign portfolio investors (FPIs) increase their investment legroom, IndusInd will gradually be added to a global index. This will help to soften the blow of the selling that will result from its delisting from the Sensex and Nifty.
The next rebalance for BSE indices is scheduled for June, and the review period ends on April 31. Meanwhile, the next rebalance for NSE indices will take place in September, with the review period ending on July 31.
"Existing constituents ranked 39 or lower on average free float market capitalization are removed from the index to make room for higher-ranked stocks. Indusind Bank is ranked 57th and is almost certainly going to be removed. "Deletion from the BSE Sensex index will necessitate passive trackers selling 15.5 million shares at the close on June 20," said Insight Provider Brian Freitas of Periscope Analytics, who writes for Smartkarma.
Freitas identified IndusInd as a deletion candidate in February, well before the current turmoil, when its ranking had dropped to 51.
"We believe Indusind Bank is likely to be removed from the index at the September rebalance. Deletion from the Nifty Index will necessitate passive trackers selling 27.4 million shares at the close on September 29," he said.
On the plus side, FPI selling in the stock has increased foreign investment room, which will lead to the stock being added to a global index, resulting in staggered passive inflows.
"After increasing foreign room by more than 20%, Indusind Bank will be added to the index at the close on March 21, but with a 5% float. "That float will increase by 10% at subsequent rebalances until the foreign ownership limit is met," said Freitas.
"In total, passives tracking the index will buy 22.5m shares from next week to mid-December 2026," he stated.
At the current stock price, IndusInd will experience passive selling worth Rs 1,042 crore and Rs 1,842 crore as a result of its removal from the Sensex and Nifty. In contrast, its inclusion in the global index will result in inflows of Rs 1,512 crore.
Still, "there will be net selling in the stock further adding downward pressure over the next few months," according to Freitas.
