FTSE Russell’s move puts BSE-listed stocks on track for global index consideration from March 2027, potentially opening a new route to foreign passive funds
India’s oldest stock exchange has received a boost from global index provider FTSE Russell, a move that could eventually open the door for more BSE-listed companies to be included in widely tracked international equity indices and attract passive investment flows.
FTSE Russell said on Friday that the Bombay Stock Exchange (BSE) had met the criteria to qualify as an eligible exchange for its equity indices. Stocks listed on BSE’s main board will be assessed for index eligibility starting with FTSE Russell’s March 2027 review.
The development means companies whose shares trade on BSE can now be considered for inclusion in FTSE Russell indices, subject to meeting other requirements such as size, liquidity and investability.
What does the decision mean?
Global indices are closely tracked by institutional investors and passive funds, including exchange-traded funds and index funds. When a stock is added to a major index, funds designed to replicate that index may have to buy the stock.
That makes eligibility an important first step for BSE-listed companies. It does not guarantee index inclusion or immediate foreign inflows, but it expands the pool of Indian securities that can potentially qualify for FTSE Russell’s global benchmarks.
More from BusinessThe first assessment of BSE main-board stocks under the new framework will take place during the March 2027 review.
FTSE Russell also said companies listing on BSE’s main board through initial public offerings will be eligible for fast-track screening. This could allow qualifying newly listed companies to be considered sooner rather than waiting for a regular index review.
Why does this matter for BSE-listed stocks?
Until now, the National Stock Exchange (NSE) was the Indian exchange whose listed securities were eligible for inclusion in FTSE Russell indices.
The latest decision gives BSE a similar route into the index provider’s eligibility framework.
However, FTSE Russell said that where a company is listed on both BSE and NSE and meets liquidity requirements on both exchanges, the NSE-listed security would be selected for index eligibility. The index provider cited the NSE’s higher participation from international institutional investors.
That means the biggest immediate benefit could be for companies that are listed only on BSE or where the BSE listing becomes the relevant security for meeting FTSE Russell’s index rules.
Potential for passive fund flows
The prospect of greater foreign participation is one of the key reasons the decision is significant.
Stocks must first qualify for an index before passive funds tracking that benchmark can invest in them as part of index replication. Actual flows will depend on how many BSE-listed securities ultimately make it into FTSE Russell indices and the size and importance of the benchmarks tracking them.
The decision therefore creates a potential new channel for passive capital rather than guaranteeing a fixed amount of investment.
For investors, index inclusion can also improve a stock’s visibility among global fund managers. But the impact will vary from company to company, depending on factors including market capitalisation, free float, trading volumes and foreign investment limits.
A boost at an important time for BSE
The FTSE Russell decision comes shortly after another major index development for BSE.
The NSE earlier this month said it would add BSE Ltd to its benchmark Nifty 50 index from September. Analysts at Nuvama had estimated that the inclusion could bring around $695 million in inflows into BSE.
The two developments highlight BSE’s growing prominence in India’s capital markets, although they affect the exchange in different ways. The Nifty 50 decision concerns BSE Ltd, the listed company that operates the exchange, while FTSE Russell’s latest decision concerns the eligibility of securities listed on the BSE platform.
For now, the key date for companies and investors will be March 2027, when BSE main-board stocks are set to undergo their first assessment for FTSE Russell index eligibility.
The decision does not mean every BSE-listed stock will enter a global index. But it gives qualifying companies a new opportunity to be considered, potentially widening their access to global passive capital over time.
(With inputs from agencies.)
