IndusInd may get ousted from Sensex, Nifty; stock may see inclusion in global index: Report

IndusInd Bank, the fifth largest bank in India, is facing the possibility of being removed from the benchmark Sensex and Nifty indices following a significant 30% decline in its stock price this year. The company’s concerns about losses related to its derivatives portfolio have contributed to this decline.

However, there is hope that an increase in foreign portfolio investor (FPI) investment “room” will eventually lead to IndusInd being included in a global index, providing some stability amidst the selling resulting from its potential removal from the Sensex and Nifty.

The BSE indices are set for a rebalance in June, with the review period ending on April 31. As for the NSE indices, their next rebalance is scheduled for September, with the review period concluding on July 31.

“Existing constituents ranked 39 or below on average free float market cap are deleted from the index to make place for higher ranked stocks. Indusind Bank is ranked 57th and is a sure deletion. Deletion from the BSE Sensex index will require passive trackers to sell 15.5 million shares at the close on June 20,” Brian Freitas of Periscope Analytics told Business Standard.

It is worth mentioning that Freitas had already identified IndusInd as a potential deletion candidate in February, prior to the company’s recent period of instability.

“We see Indusind Bank as a high probability deletion from the index at the September rebalance. Deletion from the Nifty Index will require passive trackers to sell 27.4 million shares at the close on September 29,” he added.

FPI selling of IndusInd Bank has brought forth a positive outcome, driving up foreign investments and paving the way for the stock to be included in a global index. This will subsequently lead to gradual passive inflows.

“Following an increase in foreign room to more than 20 per cent, Indusind Bank will be added to the index at the close on March 21, but at a 5 per cent float. That float will increase by 10 per cent at subsequent rebalances till the foreign ownership limit is reached,” Freitas further added. “In total, passives tracking the index will buy 22.5 million shares from next week to mid-December 2026.”

Based on the current stock price, IndusInd is expected to experience passive selling of approximately Rs 1,042 crore and Rs 1,842 crore as it gets removed from the Sensex and the Nifty. Conversely, the company is anticipated to receive inflows totaling Rs 1,512 crore as a result of its inclusion in the global index.

On Thursday, IndusInd Bank shares closed at Rs 672.65 on the NSE, down by 1.76%.

As of March 13, the NSE placed IndusInd Bank’s stock under short-term Additional Surveillance Measure (ASM) – Stage 1. This action came as a result of a significant 30% decrease in the stock price, which followed the disclosure of accounting irregularities in the bank’s derivatives portfolio.

IndusInd Bank’s shares have experienced a significant drop, losing 30% of their value in the past week. This decline can be attributed to various factors, including the Managing Director’s one-year extension (as opposed to the typical three-year term) and the revelation of a Rs 1,577 crore net worth decrease due to accounting discrepancies. Consequently, investor sentiment on Dalal Street has turned pessimistic, leading many traders to avoid the stock.

In a recent disclosure to the exchanges, the private lender reported that an internal review has projected an adverse impact equivalent to approximately 2.35% of the bank’s net worth as of December 2024.