Banking group Investec (INVP) looks primed to join the FTSE 100 at September’s index reshuffle, according to our calculations and assuming no major changes to market values over the next week.

Investec is expected to replace Provident Financial (PFG) whose share price collapsed earlier this week following another profit warning, dividend cancellation, chief executive departure and investigation by the financial regulator.

Three stocks could be promoted from the FTSE Small Cap to FTSE 250 index, based on our analysis of market values on 22 August. These are: investment fund Sequoia Economic Infrastructure (SEQI); Renewi (RWI) which is the merged Shanks and Van Gansewinkel waste business; and share registrar Equiniti (EQN).

They are likely to replace three stocks which currently look vulnerable for demotion from the FTSE 250 index to the FTSE Small Cap index. These include Carillion (CLLN) which is set to be kicked out of the FTSE 250 given its market value has fallen by three quarters since the last index reshuffle in June.

The other departing stocks are likely to be van hire group Northgate (NTG) and miner Petra Diamonds (PDL).

The promotions and demotions will be confirmed by FTSE next week ahead of the index changes in September. These events are important to near-term share price movements as tracker funds have to either sell stocks leaving certain indices or buy those being promoted.

As such, a falling share price could get even worse if tracker funds no longer need to own the shares; and a rising share price could have upwards momentum if trackers are buying.

The rules are slightly complex regarding the way in which stocks qualify for certain indices. FTSE undertakes a quarterly review based on the following criteria and using market valuations on a specific day.

A share will join the FTSE 100 if it has risen to 90th place or above; a stock needs to have risen to 325th place or above to join the FTSE 250. (Remember that the FTSE 350 is the FTSE 100 and FTSE 250 index combined).

Demotions happens if a FTSE 100 stock has fallen to 111th place or below; and 376th place or below in the case of a FTSE 250 stock.

A constant number of constituents need to be maintained for the FTSE 100 and FTSE 250 indices. If more companies qualify for promotion to one of those indices than qualify for demotion, the lowest ranking constituent(s) already in that index is deleted.

Likewise, when more companies qualify to be demoted than promoted, the highest ranking company or companies not presently in that index will be inserted to match the number leaving the index.

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