Index Rebalancing

Index rebalancing is the periodic process by which the composition and weightings of the stocks in a market index are reviewed and adjusted to ensure the index continues to accurately represent the market segment it is designed to track. In India, NSE rebalances indices like the Nifty 50 semi-annually, adding companies that have grown in market capitalisation and liquidity while removing those that no longer meet the inclusion criteria. Index rebalancing has meaningful market implications—stocks added to major indices like Nifty 50 typically see significant buying from passive index funds and ETFs, while stocks removed often face selling pressure.