PSU Stocks React To Change In Nifty CPSE Index
The NIFTY CPSE Index was created to help the government pare its holding in state-owned companies.
Shares of Cochin Shipyard Ltd., NHPC Ltd., NMDC Ltd. and Power Grid Corporation Ltd. surged on their inclusion in the index of public sector firms aimed at helping the government cut its holding.
The stocks of Indian Oil Corporation Ltd. and Power Finance Corporation Ltd. declined after exclusion from the Nifty Central Public Sector Enterprises Index.
Power Grid, NMDC, Cochin Shipyard and NHPC—which together have 29.1 percent weight in the index—surged 3-12 percent on being included. Indian Oil Corporation and Power Finance Corporation—together having 26.9 percent weight—fell 4.08 percent and 7.91 percent, respectively, on exclusion.
According to the revision in criteria announced on Friday, from Jan. 24 state-run firms with government holding of more than 51 percent will be eligible against the earlier threshold of 51.5 percent. The NIFTY CPSE Index was created to help the government pare its holding in state-owned companies. The CPSE Exchange Traded Fund invests in stocks from the index, with a concentrated portfolio where stocks can have weights of as high as 20 percent.
Motilal Oswal in its notes suggested inflows to the tune of Rs 3,083 crore in the four stocks included in the index. It estimates an outflow of Rs 2,849 crore from IOC and PFC by Jan. 23 assuming CPSE ETF assets of Rs 10, 600 crore.
Deven Choksey of KR Choksey group, said while changes in the composition of the index would have a bearing on these stocks, that would be short-lived given as nothing changes fundamentally for these companies.