BEL, Trent Likely To Enter Nifty 50 List In September Rejig; Why Not Jio Financial, Zomato?

The National Stock Exchange (NSE) is scheduled to rebalance its indices in August which will come into effect from September 30, 2024. In the upcoming rejig, brokerage JM Financial expects defence PSU giant Bharat Electronics (BEL) and Tata Group-backed retail chain company, Trent Ltd to enter the Nifty 50 elite list.

The two stocks are expected to be Nifty 50 entrant despite Jio Financial Services and Zomato having a higher average market cap than Trent and BEL.

In its latest report for the upcoming NSE's September rebalancing, JM Financial said, "NSE indices rebalancing announcement is scheduled in August, effective from September 30."

It added, that for the September rebalancing, the index provider assumes an average free float market cap between the period of February 1 to July 31.

Based on the average free float market cap to date, JM Financial expects the following changes in the Nifty:

1. The brokerage expects Trent and BEL to be added to the Nifty 50 list. The inclusion is likely to create a flow of 412 million dollars in Trent, and 392 million dollars in BEL.

2. Both BEL and Trent are expected to replace tech giant LTIMindtree and Divi's Laboratories. On the exit from Nifty 50, LTIM may witness an outflow of 180 million dollars, while Divis may log an outflow of 224 million dollars.

3. On the effect of rebalancing, expected shares in Trent are seen to be 6.9 million equities, while the expected shares are likely a whopping 115.3 million in BEL. On the other hand, LTIMindtree may see a decline of 3.1 million shares, while Divis may witness a drop of 4.1 million shares.

Furthermore, JM's note said, it is interesting to note that Jio Financial Services and Zomato have an average free float market cap higher than Trent and BEL. However, they are not likely to be included in the Nifty as they are not part of the F&O segment.

But, the brokerage also added that any inclusion of them in the F&O segment would lead to both Jio Financial and Zomato's inclusion in Nifty. If this is the case, then, the brokerage expects Jio Financial, Zomato and Trent to enter Nifty 50, while LTIM, Divis and Eicher Motors may exit.

The Nifty 50 is a well-diversified 50 stock index and it represents important sectors of the economy. The Nifty 50 Index represents about 59% of the free float market capitalization of the stocks listed on the NSE as of September 29, 2023.

The base period selected for the Nifty 50 index is the close of prices on November 3, 1995, which marks the completion of one year of operations of NSE's Capital Market Segment. The base value of the index has been set at 1000 and a base capital of Rs.2.06 trillion.

Effective June 26, 2009, the Nifty 50 is computed using the Free Float Market Capitalisation weighted method, wherein the level of the index reflects the free float market capitalisation of all stocks in the Index.

Nifty 50 can be used for a variety of purposes such as benchmarking fund portfolios, launching of index funds, ETFs and structured
products.

As of May 31, 2024, as per the NSE data, HDFC Bank holds the highest weightage in Nifty at 11.60% followed by Reliance Industries at 9.75%, ICICI Bank at 7.93% weightage, Infosys at 5.06%, Larsen & Toubro at 4.37%, ITC at 3.81%, Tata Consultancy Services at 3.75%, Bharti Airtel at 3.60%, Axis Bank at 3.32%, and lastly SBI at 3.21%. These are top 10 stocks and their weightage on NSE.