Can Rs 5,000 cr trade happen in last 30 mins of stock market today
Suspense Crime, Digital Desk : July 19 (PTI) The Indian stock market is expected to remain very active on Friday, July 19, due to rebalancing in FTSE and Sensex. According to market experts, the rebalancing in the FTSE index is expected to bring over $600 million, which is around Rs 5,000 crore of passive foreign investment, into India. There will be no major changes in the Sensex rebalancing; however, Bharti Airtel is likely to see its index weight increase, which will keep the stock under focus, reports ET NOW.
Why will there be a big movement in such stocks
When stocks are added to the FTSE index, many large passive funds and ETFs (exchange-traded funds) worldwide are likely to include their shares in their portfolios. This inclusion will be of passive funds, i.e., money that will invest in stocks based on the index's performance and weights. Due to these fund managers who invest without looking into the fundamental of the company and solely focus on the index, stocks generally see large trades around market closing time.
Which stocks may see buying/selling
The biggest change in the Sensex rebalancing may come in the form of increase in weight of Bharti Airtel. Nuvama Alternative and Quantitative Research have estimated a $95 million potential investment in Bharti Airtel. Eternal may also see an investment of $5 million. Conversely, the weight of stocks like Maruti Suzuki, HDFC Bank, Reliance Industries, and ICICI Bank are expected to be reduced. So, there may be some outflow in these stocks.
Market observers believe that the impact of index rebalancing is mostly seen in the closing session, whenindex-based funds execute their trades. So, investors should pay close attention to Bharti Airtel and FTSE stocks today.
What may change in Sensex
Unlike FTSE rebalancing, the impact of Sensex rebalancing is likely to be less substantial. According to analysts, Bharti Airtel's weight is expected to increase further in the Sensex, but other than that, no significant changes are expected.
How to understand FTSe rebalancing
Let's imagine a situation where the world's largest investment funds follow certain global indices for their investment decisions. In this scenario, when a company gets added to any of these global indices, its portfolio funds are obligated to invest in such a company. This is the reason that, after inclusion in the FTSE index,foreign investment in any company is usually expected to increase. Companies like Tata Capital, Lenskart, Meesho, Groww, LG Electronics India, and ICICI Prudential AMC could become the center of attention today. FT SE refers to the Financial Times Stock Exchange, which is a UK-based index company that offers a range of global and regional equity indices including the FTSE All-World Index, the FTSE 100 Index, and the FTSE 250 Index. Many passive and ETFs world-wide include the performance and weight of companies included in FT SE as a bench mark for investments. The process of rebalancing an index such asFTSEis to re-evaluate the securities held in that index on a predetermined schedule and to add or remove securities to reflect any changes in the underlying market. As and when rebalancing is done of theFTSE index the portfolio holdings of such index's affiliated fundsare supposed to be updated so as to reflect the new securities additions and removals in the index. Hence, stocks that are added or removed fromFTSE(or any other index) witness significant and immediate changes. On the contrary, the impact of Sensex rebalancing will most likely be nominal today. Market sources suggest that Bharti Airtel's weight in the Sensex could increase by a few basis points. Aside from Bharti Airtel, no other major changes are anticipated. The biggest advantage of a stock becoming a component of FTSE is that while it might not directly improve a company's business or profits instantaneously, it brings the company a higher level of global visibility and thus attracts the attention of foreign investors. Consequently, these stocks tend to experience a buying pressure from foreign funds on account of their increased exposure within the index. These stocks could, therefore, witness higher trading activity, especially in the last few hours of the trading day when most of the index-based funds realign their holdings.
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