Explained: How Sensex rebalancing impacts stocks

The quantum of buying and selling that is required on account of any index rebalancing also needs to be looked at from the prism of daily volumes in the counter

The BSE’s arm Asia Index has announced Wipro will replace Bajaj Auto in the 30-share Sensex. The move is part of a semi-annual rebalancing exercise and will take effect when the market opens for trading on December 20.  On account of the rejig, Wipro will see buying by passive funds to the tune of Rs1,300 crore, while Bajaj Auto will see selling of Rs636 crore, estimate analysts.

Why does this happen?

Insight provider Brian Freitas, who publishes on Smartkarma, says passive assets tracking the Sensex are worth around Rs86,650 crore ($11.7 billion). In addition, there are a lot of actively-managed domestic equity