Decoded: What is index rebalancing, and how does it impact stocks?

Key index providers such as MSCI, FTSE, and the homegrown Nifty undergo quarterly, or semi-annual rejig of their indices. Read more to find out what it means and how it affects stocks

If you track financial news, you would have read or heard the term "index rebalancing" in the past few weeks. This would have been in relation to the MSCI and the Adani group. Key index providers such as MSCI, FTSE, and the homegrown Nifty undergo quarterly, or semi-annual rejig of their indices. But what exactly is index rebalancing, and how does it affect a stock?

What is an index?

An index is a gauge of the performance of a basket of securities. For instance, the MSCI India or Nifty or the BSE Sensex indices are the gauges that tell us