Nifty Semi Annual Review – Expected Changes

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The NIFTY 50 is the flagship index on the NSE. The Index tracks the behaviour of 50 blue-chip companies selected from the universe of NIFTY 100 based on free-float market capitalization. The methodology also takes into account constituent changes in the index and corporate actions such as stock splits, rights issuance, etc., without affecting the index value.  The NIFTY 50 stocks represent about 66% of the total float adjusted market capitalization of the National Stock Exchange (NSE). It covers major sectors of the Indian economy and offers investment managers exposure to the Indian market in one efficient portfolio.

The review of NIFTY 50 is undertaken semi-annually based on data for six months ending January and July. The replacement of stocks in NIFTY 50 (if any) is generally implemented from the first working day after F&O expiry of March and September. In case of any replacement in the index, a four weeks’ prior notice is given to the market participants.

Security Inclusion Criteria

Eligible Securities: Constituents of NIFTY 100 index that are available for trading in NSE’s Futures & Options segment are eligible for inclusion in the NIFTY 50 index. The latest composition of NIFTY 100 including most recent changes whether announced or yet to be announced shall be considered eligible subject to availability of trading in NSE’s Futures & Options segment in such stocks.

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Liquidity: For inclusion in the index, the security should have traded at an average impact cost of 0.50 % or less during the last six months for 90% of the observations for a portfolio of Rs.10 crores.

Trading Frequency: The Company’s trading frequency should be 100% in the last six months.

Float-Adjusted Market Capitalization: Companies will be eligible for inclusion in NIFTY 50 index provided the average free-float market capitalisation is at least 1.5 times the average free-float market capitalization of the smallest constituent in the index.

Likely Exclusions

Likely Inclusions

Gail India

Tata Consumer

An inclusion in the index would attract $88.7 million worth of flows to Tata Consumer and exclusion from the Nifty is likely to lead to selling worth $56.7 million in GAIL’s shares. In August, the exchange had included Divi’s Laboratories and SBI Life Insurance Company in the Nifty and excluded Bharti Infratel and Zee Entertainment Enterprises. These changes were made effective on September 25.

The index changes are likely to be announced by the second half of February 2021 and the same should take effect on March 26, 2021. In a calendar year a maximum of 10% of the number of stocks that constitute the index can be changed.

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The author may have positions in the stocks as mentioned in the article above, please assume us to be biased. This is not a recommendation to buy or sell securities. This is purely information about the company mentioned. Equity investing contain risks and please consult your financial adviser for any buy and sell securities!


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Adroit Financial

Adroit Financial

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