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Business News/ Market / Stock-market-news/  NSE allows differential voting rights in indices
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NSE allows differential voting rights in indices

In order to be eligible for inclusion in Nifty 50 and Nifty Bank index, a stock must be available for trading in NSE's futures and options segment

Photo: MintPremium
Photo: Mint

Mumbai: India Index Services and Products Ltd (IISL), a group company of the National Stock Exchange of India Ltd (NSE), modified its stock selection criteria to include differential voting rights (DVRs) of securities, subject to certain eligibility criteria, for inclusion in its indices.

As a result, the company will include Tata Motors DVRs in the Nifty index from 1 April. Post this inclusion, the benchmark Nifty 50 index will have 51 securities, IISL said in a release after market hours on Monday.

DVRs differ from common equity shares of a company in terms of voting rights. They help companies raise funds while ceding fewer voting rights than regular shares. So they trade at a discount to common shares.

“It’s a right thing to do because the index should actually represent not just the best companies, but all products which represent the equity prices of these companies," said Jayant Manglik, president of retail distribution at Religare Securities Ltd.

“It is a step towards forward thinking," Manglik added.

According to Ajay Bodke, chief executive officer and chief portfolio manager (portfolio management services) at Prabhudas Lilladher Pvt. Ltd, for a lot of fund managers who manage index-based funds, the weightage in Tata Motors will increase because of inclusion of its DVRs.

“It is sort of a first for a bellwether index to have a share with a DVR," added Bodke.

IISL also said it will include Aurobindo Pharma Ltd, Bharti Infratel Ltd and Eicher Motors Ltd in the Nifty index from 1 April, replacing Cairn India Ltd, Punjab National Bank and Vedanta Ltd.

It also said that in order to become eligible for inclusion in Nifty 50 and Nifty Bank index, a stock must be available for trading in NSE’s futures and options segment.

The index firm also said that in view of the regulatory requirement of maintaining minimum 25% public shareholding for listed companies, the criteria of minimum free-float requirement of 10% shall not be applicable for any index.

It added that the selection of constituents for each of the broad market and sectoral indices shall be made from the universe of companies that rank within top 800, based on both average daily turnover and average daily full market capitalisation.

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Published: 23 Feb 2016, 01:42 AM IST
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