11 Aug , 2022 By : Kanchan Joshi
The regular, semi-annual change will likely see Adani Enterprises entering and Shree Cement exiting the Nifty 50 index, as per brokerage and research firm ICICI Securities. The upcoming semi-annual changes to the NIFTY50 index will be announced in August 2022 and the changes shall come into effect from September 30, 2022.
“The changes will take into account the average free float (FF) market capitalisation for the period Feb’22-Jul’22. While three stocks have qualified on free float market capitalisation criteria, Adani Enterprises edges out in terms of being in the F&O list and is the most likely candidate to replace Shree Cement," the note stated.
Smallest stock in the Nifty 50 based on free float (FF) market cap is Shree Cement, making it the top contender for exclusion. ‘Look-through earnings’ of the NIFTY50 index will drop as Shree Cement’s free float earnings for FY22 stands at Rs8bn or 4x that of Adani Enterprises’ FF earnings for FY22. However, only Adani Group stock Adani Enterprises qualifies as its 6- month FF Mcap is >1.5x along with stock included in F&O list, the brokerage added.
Meanwhile, ICICI Securities said that the upcoming semi-annual changes to the Nifty 50 index wherein Adani Enterprises is likely to replace Shree Cement is dwarfed by the impact of the impending HDFC merger.
However, the merger-related changes to the index will depend on the date of shareholders’ approval, hence no definite timelines can be indicated at this point in time. Past example of a corporate restructuring for Grasim and related index change indicates a time lag of less than one month from the date of shareholders’ approval to announcement of exit from the index.
“The HDFC merger will likely result in an unprecedented ~14% of the NIFTY 50 weight (HDFC Ltd plus HDFC Bank) getting replaced by two new incoming stocks with a combined weight of ~1% and the remaining 13% weight getting distributed amongst the existing 48 stocks in the index at that time. On the basis of current NIFTY50 ETF AUM of Rs1.7 trn, the HDFC merger-related index changes can potentially result in buying and selling of stocks worth above Rs480 bn based on July 2022 end-prices," it added.
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