The Nifty indices quarterly rebalancing takes effect on December 30, implementing adjustments that will trigger significant index-linked inflows and outflows across multiple stocks. According to Nuvama Alternative & Quantitative Research, the rejig will impact various sectors with substantial passive fund movements as indices align with updated free-float weights and revised methodologies.

Nifty 50 Index: Top Gainers and Losers

The rebalancing within the Nifty 50 index shows a clear divide between technology and telecom sectors, with notable weight adjustments across major constituents.

Bharti Airtel leads the beneficiaries with the highest inflows of $58 million, while Eternal is projected to see inflows of around $29 million. Other gainers including Indigo, Mahindra & Mahindra, and HDFC Bank are estimated to witness inflows ranging from $8 million to $18 million.

Major Outflows Hit Technology Sector

The technology and infrastructure sectors face the most significant outflows during this rebalancing exercise, with Infosys leading the decline.

Infosys is anticipated to face the largest outflows of around $77 million, making it the top constituent to see a weight reduction. Adani Ports is also expected to see outflows of approximately $32 million, while other stocks like Reliance Industries, HCL Technologies, and Bajaj Finance are projected to see marginal weight cuts.

Nifty Bank Index Restructuring

The Nifty Bank index undergoes methodology changes with new entrants and weightage adjustments for existing constituents creating additional flow dynamics.

Yes Bank and Union Bank of India are set to be added to the Nifty Bank index, with Yes Bank expected to see inflows of $35 million corresponding to 147.20 million shares, while Union Bank is estimated to witness $32 million worth of inflows representing around 19 million shares. Weight increases 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.

Banking Heavyweights Face Reduced Weightage

The two largest banking stocks continue to experience substantial outflows as their weightages get adjusted based on revised norms.

ICICI Bank and HDFC Bank are projected to see the largest outflows in the banking space, with estimated withdrawals of $87 million and $86 million respectively. The changes will be reflected in the indices from the start of trading on December 31, following the effective date of December 30.

Indian equity markets ended lower in a subdued session as sustained foreign institutional investor outflows and year-end caution weighed on sentiment. With December F&O expiry approaching, analysts expect elevated volatility and range-bound trading in the near term.

Market Performance Overview

The trading session reflected cautious investor sentiment as major indices posted losses amid low volumes. The Nifty's decline was accompanied by varied sectoral performance, with certain stocks bucking the overall trend.

Technical Outlook and Volatility

With the December series monthly F&O expiry approaching, market volatility is expected to remain elevated. The Nifty is likely to trade in a range of 25,800–26,100 in the near term. India VIX, which measures market fear, rose 6.00% to settle at 9.72 levels, indicating increased uncertainty among traders.

Institutional Flow Dynamics

Foreign portfolio investors continued their selling spree, net selling shares worth ₹2,760.00 crore. However, domestic institutional investors provided support by net buying ₹2,643.00 crore worth of equities, partially offsetting the foreign outflows.

Top Performers and Laggards

Despite the overall market decline, several stocks demonstrated strong performance. Tata Steel, Asian Paints, Tata Consumer Products, Grasim Industries, and Axis Bank emerged as the day's top gainers. Conversely, Reliance Industries, Bharti Airtel, ICICI Bank, HCL Technologies, and Mahindra & Mahindra were among the worst performers in the Nifty 50 index.

Major Corporate Developments

Several companies announced significant business developments that could impact their future operations and financial performance.

Defense and Infrastructure Sector

Bharat Electronics received an additional order worth ₹569.00 crore, covering various defense equipment including radars, tank overhaul systems, communication equipment, fire control systems, simulators, antenna stabilization systems, security software, components, upgrades, spares, and services. RVNL emerged as the lowest bidder for a ₹201.00 crore project from East Coast Railway, strengthening its infrastructure portfolio.

Healthcare and Pharmaceuticals

Lupin signed an exclusive partnership agreement with Gan & Lee for GLP-1 receptor agonist Bofanglutide, a fortnightly injection used to treat Type-2 Diabetes and obesity in adults. This collaboration could expand Lupin's diabetes treatment offerings in the market.

Aviation and Manufacturing Updates

IndiGo revised its pilot pay structure by restructuring additional allowances, expected to increase take-home pay. The changes include a 50.00% increase in Domestic Layover Allowance to ₹3,000.00 for Captains and ₹1,500.00 for First Officers, alongside increased Deadhead Allowance to ₹4,000.00 per hour for Captains and ₹2,000.00 per hour for First Officers.

Futures and Options Activity

Nifty futures declined 0.44% to 26,119.00, trading at a premium of 77.00 points. The futures open interest increased by 75.00%, indicating active participation in derivative markets. Maximum call open interest was observed at 26,100.00 while maximum put open interest stood at 25,900.00, suggesting key support and resistance levels for upcoming trading sessions.

Sammaan Capital is currently in the F&O ban period, having crossed 95.00% of the market-wide position limit. The rupee depreciated eight paise to close at 89.98 against the US dollar, weighed down by foreign fund outflows and negative equity trends.