Edelweiss Expects HDFC Life, SBI Life To Replace Vedanta, Zee Entertainment In Nifty 50
Indices are reconstituted twice every year based on the data for January and July.
HDFC Life Insurance Co. and SBI Life Insurance Co. is expected to replace Vedanta Ltd. and Zee Entertainment Enterprises Ltd. in the benchmark Nifty 50 Index from Sept. 25, according to Edelweiss Research.
Divi’s Laboratories Ltd. and Dabur India Ltd. will likely replace Bharti Infratel Ltd. and GAIL (India) Ltd., the brokerage said in a note.
Indices are reconstituted twice every year based on the data for January and July. In February, Yes Bank Ltd. had made way for Shree Cements Ltd.
After the inclusion, Edelweiss Research estimates HDFC Life to see an inflow of nearly $100 million with a weight of 99 basis points because of the rebalancing of index funds. Vedanta, with a 47-basis-point weight, is expected to see an outflow of $47 million after the rejig, it said.
Selection Criteria
One of the criteria the NSE follows to select the Nifty 50 constituents is the free-float market capitalisation, which should be at least 1.5 times the smallest member of the index.
The second factor is impact cost or the cost of executing a transaction in a given stock, for a specific predefined order size at any given point of time. A stock needs to have enough liquidity where large orders can be executed without incurring an impact cost greater than 0.5%.
Other criteria for inclusion are:
- The stock should be available for trading in the futures & options segment.
- Companies eligible for inclusion in the Nifty 50 should have at least 10% of its stock available to investors.
- The company must be domiciled in India and available for trade on the NSE.
(Corrects an earlier version that misstated the changes as a final rejig. This is what Edelweiss Research expects.)