Nifty Bank welcomes Yes Bank, Union Bank as rejig comes into effect today. Which stocks will see outflows?

Following compulsory structural change mandated by market regulator Sebi, The National Stock Exchange has declared the inclusion of two new lenders - Yes Bank and Union Bank - into the Bank Nifty index starting today, December 31.

As per Nuvama Institutional Equities, the inclusion could likely land combined inflows of $67 million into the two new entrants. The former alone is projected to attract $35 million. Union Bank is expected to see inflows of $32 million. With this change, from the current 12 constituents, the index will now house 14 lenders.

Weight increases in Nifty Bank are also expected in Federal Bank, IDFC First Bank, Punjab National Bank, IndusInd Bank, and AU Small Finance Bank, with estimated inflows ranging from $11 million to $16 million.


Meanwhile, the two largest outflows in the banking space are projected in ICICI Bank and HDFC Bank, with estimated withdrawals of $87 million and $86 million, respectively.

The additions are part of the market regulator’s move directing exchanges to have at least 14 stocks in non-benchmark indices such as BSE’s Bankex and NSE’s Bank Nifty and Finnifty that are eligible for being traded in the derivatives segment. The regulator also recommended limits on weights for each stock and the top three constituents. They are aimed at reducing the influence of any stock or a set of stocks on the indices.

Accordingly, the NSE has imposed a 43% cap on the combined weight of the top three Bank Nifty constituents namely HDFC Bank, ICICI Bank and State Bank of India, down from the current 60%. This adjustment will be implemented in four equal monthly phases between December and March, triggering portfolio rebalancing and likely outflows from passive funds, including index funds and ETFs tracking the Bank Nifty.

As for the 50-share Nifty, Bharti Airtel is expected to be among the key beneficiaries of the rebalance, with likely inflows of about $59 million, while Eternal may see inflows of nearly $29 million. Other stocks set to gain weight include IndiGo, Mahindra & Mahindra (M&M) and HDFC Bank, each estimated to attract inflows in the $8–18 million range.

In contrast, Infosys is projected to be the biggest loser, with expected outflows of roughly $78 million. Adani Ports could also face outflows of around $32 million, while Reliance Industries, HCL Technologies and Bajaj Finance are likely to see modest reductions in their index weights.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. They do not represent the views of the Economic Times)