Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.</li>
<li>Some stocks are expected to be inclusions to global indices later this month while others are potential <a href="https://www.smartkarma.com/entities/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY Index</a> and/or <a href="https://www.smartkarma.com/entities/nse-nifty-next-50-index" target="_blank" data-smartkarma-citation="entities:36053:1" rel="noopener">Nifty Next 50 Index</a> changes in March.</li>
<li>On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.</li>
</ul>


We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
Some stocks are expected to be inclusions to global indices later this month while others are potential NIFTY Index and/or Nifty Next 50 Index changes in March.
On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.


AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet

<ul>
<li>Halfway through the review period, we see 6 potential changes for the <a href="https://www.smartkarma.com/entities/nse-nifty-next-50-index" target="_blank" data-smartkarma-citation="entities:36053:1" rel="noopener">NSE Nifty Next 50 Index (NIFTYJR INDEX)</a> using the current index methodology.</li>
<li>Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.</li>
<li>There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&amp;O market.</li>
</ul>


Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&amp;O market.


NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

<ul>
<li>Foreign investors sold ~5.7m shares of <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> from July to September. That selling has pushed foreign room above the key 15% threshold.</li>
<li>With foreign room crossing 15%, passive trackers will need to buy a chunk of <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> stock at the end of November.</li>
<li>There will be positioning on <a href="https://www.smartkarma.com/entities/indusind-bank-ltd" target="_blank" data-smartkarma-citation="entities:1558:1" rel="noopener">Indusind Bank (IIB IN)</a> though it appears some of that was taken off in the last couple of days.</li>
</ul>


Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.


IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

<ul>
<li>We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 13 stocks from MidCap to SmallCap.</li>
<li>The expected migrations from SmallCap to MidCap have outperformed the other potential migrations with all stocks moving higher over the last six month.</li>
<li>Active managers could continue to realign their portfolios. Some of the upward migrations will have passive flows in the next few days and over the next few months.</li>
</ul>


We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 13 stocks from MidCap to SmallCap.
The expected migrations from SmallCap to MidCap have outperformed the other potential migrations with all stocks moving higher over the last six month.
Active managers could continue to realign their portfolios. Some of the upward migrations will have passive flows in the next few days and over the next few months.


AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

<ul>
<li>NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.</li>
<li>
<a href="https://www.smartkarma.com/entities/punjab-national-bank" target="_blank" data-smartkarma-citation="entities:542:1" rel="noopener">Punjab National Bank</a>, <a href="https://www.smartkarma.com/entities/shriram-transport-finance" target="_blank" data-smartkarma-citation="entities:253:1" rel="noopener">Shriram Transport Finance</a>, <a href="https://www.smartkarma.com/entities/trent-ltd" target="_blank" data-smartkarma-citation="entities:8410:1" rel="noopener">Trent</a>, <a href="https://www.smartkarma.com/entities/tvs-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:16123:1" rel="noopener">TVS Motor</a> and <a href="https://www.smartkarma.com/entities/zydus-lifesciences-ltd" target="_blank" data-smartkarma-citation="entities:12914:1" rel="noopener">Zydus Lifesciences</a> will replace <a href="https://www.smartkarma.com/entities/acc-ltd" target="_blank" data-smartkarma-citation="entities:183:1" rel="noopener">ACC</a>, <a href="https://www.smartkarma.com/entities/fsn-e-commerce-ventures-nykaa" target="_blank" data-smartkarma-citation="entities:33796:1" rel="noopener">FSN E-Commerce Ventures</a>, <a href="https://www.smartkarma.com/entities/hdfc-asset-management-co-ltd" target="_blank" data-smartkarma-citation="entities:27027:1" rel="noopener">HDFC Asset Management</a>, <a href="https://www.smartkarma.com/entities/indus-towers-ltd" target="_blank" data-smartkarma-citation="entities:8922:1" rel="noopener">Indus Towers</a> and <a href="https://www.smartkarma.com/entities/page-industries-ltd" target="_blank" data-smartkarma-citation="entities:4940:1" rel="noopener">Page Industries</a>.</li>
<li>The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.</li>
</ul>


NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.

Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.


NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

India

The Nifty 100 Index is a free-float capitalization weighted index of the constituents of Nifty Index and Nifty Junior Index. The index was launched December 1, 2005. The index has a base value of 1000 effective January 1, 2003.

Nifty 100 Index (NSE100 INDEX)

AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet

We see 43 stocks migrating between different market cap segments in Jan. A lot of stocks will have passive flows from NIFTY, NIFTYJR and global...

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NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

There should be 6 changes to the NEXT50 in March. NSE Indices has yet to announce next steps in the consultation that will limit membership to FnO...

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IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Foreign investors sold IndusInd Bank from July to Sep. With foreign room crossing 15%, passive trackers will need to buy IndusInd in Nov. There is...

Brian Freitas

AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

We see 42 potential migrations between the size categories. The small to mid migrations have outperformed. There will be a lot of overlap between...

Brian Freitas

NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

There are 5 changes for the NEXT50 Index as the existing methodology is used. Turnover is huge and there will be big impact on a lot of stocks....

Brian Freitas