Nifty rejig: Highest inflows likely in Shriram Finance, HDFC Bank, Jio Financial
- SBI, UPL, ICICI Bank to see the most outflows
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Business News/ Markets / Stock Markets/ Nifty rejig: Highest inflows likely in Shriram Finance, HDFC Bank, Jio Financial
The semi-annual rebalancing of Nifty indices, effective 28 March following the rejig on 27 March, is expected to significantly impact stock flows.
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Abhilash Pagaria, head of Nuvama Alternative & Quantitative Research, expects substantial inflows for Shriram Finance Ltd, HDFC Bank, Jio Financial Services, NTPC, Adani Power, among others.
State Bank of India (SBI), UPL, ICICI Bank, Oil & Natural Gas Corp, Coal India, Reliance Industries, Kotak Mahindra Bank, on the other hand, will see some of the biggest outflows.
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This reshuffling is part of the National Stock Exchange's (NSE) systematic biannual review, aimed at ensuring indices accurately reflect current market conditions.
In the wake of the review, exchange-traded funds and mutual funds tracking these indices also undergo a rebalancing process to synchronize their portfolios with the updated compositions, a critical step for maintaining proper asset allocation.
Cumulatively (net of all passive indices), the highest inflows are expected in Shriram Finance ($188 million), HDFC Bank ($94 million), Jio Financial Services ($80 million), NTPC ($66 million), Adani Power ($45 million), and Power Finance Corp ($45 million).
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Meanwhile, SBI ($103 million), UPL ($95 million), ICICI Bank ($77 million), ONGC ($32 million), PI Industries ($32 million), and Coal India ($31 million) are among the top stocks likely to experience outflows, according to Nuvama Alternative & Quantitative Research.
On the benchmark Nifty 50 index, Shriram Finance could see inflows worth $260 million, as it replaces UPL Ltd in the Nifty 50 index. UPL, on the other hand, is expected to face outflows of approximately $95 million due to its exclusion.
The exclusion of UPL from the Nifty 50 follows its removal from the Nifty 100, the parent index of the Nifty 50. In contrast, Shriram Finance's inclusion was based on having the highest six-month average free-float market capitalization among the contenders, as announced by the NSE on 28 February.
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Other Nifty 50 stocks expected to see significant movements are: Mahindra & Mahindra with an anticipated $42 million influx, followed by Bharti Airtel with $26 million, and Axis Bank with $18 million.
Pagaria said HDFC Bank's weightage in the Nifty Bank index will rise to 29.1% from 25.6%, resulting in inflows of $123 million. Conversely, SBI may see an outflow of $95 million due to a reduction in its weightage in the index to 9.1% from 11.8%.
The Nifty Next 50 index will welcome new entrants such as Jio Financial Services, Power Finance Corp, Adani Power, REC, and Indian Railway Finance Corp Ltd, anticipated to attract inflows ranging from $23 million to $80 million.
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Conversely, Shriram Finance, PI Industries, Procter & Gamble Hygiene & Health Care Ltd, Muthoot Finance, and Adani Wilmar Ltd, exiting the index, are expected to experience outflows between $7 million and $72 million.
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