NSE rejigs indices, excludes 4 Adani stocks from Nifty Alpha 50 index. What does this mean?

The National Stock Exchange of India (NSE) rejigged its indices on Monday. The exchange has excluded four Adani firms from its Nifty Alpha 50 list. Notably, NSE removed the majority of Adani firms from its alpha indexes either for Nifty 100 or Nifty 200. The replacement is done on account of a quarterly review of strategy indices. These changes will come into effect from March 31, 2023.

As per the NSE statement, a total of 14 stocks are excluded from the Nifty Alpha 50 index, of which, four are Adani stocks. These are -- Adani Enterprise, Adani Green Energy, Adani Total Gas, and Adani Transmission.

Other stocks excluded are --- Aditya Birla Fashion and Retail, Angel One, Elgi Equipments, Fine Organic Industries, Gujarat Narmada Valley Fertilizers and Chemicals, KEI Industries, Page Industries, SRF, Suzlon Energy, and Tata Elxsi.

In Nifty Alpha 50, these mentioned stocks are replaced by --- Aditya Birla Capital, Apollo Tyres, Bank of India, Bharat Heavy Electricals, Britannia Industries, IDFC First Bank, Jindal Steel & Power, L&T Finance Holdings, Mahindra & Mahindra Financial Services, MRF, Power Finance Corporation, Punjab National Bank, Siemens, Zydus Lifesciences.

Nifty Alpha 50 Index aims to measure the performance of securities listed on the NSE with high alphas. It is a well-diversified 50-stock index. In order to make the 50 stock index investible and replicable, criteria such as liquidity and market capitalization are applied while the selection of securities, as per the NSE website.

NSE has also excluded Adani's cement stocks namely Ambuja Cements and ACC from Nifty Low Volatility 50 index.

Also, Adani Enterprises, Adani Green Energy, Adani Ports, Adani Total Gas, and Adani Transmission are excluded from the Nifty 100 Alpha 30 index. Meanwhile, Adani Enterprises is also excluded from the Nifty 200 Alpha 30 index.

NIFTY100 Alpha 30 index aims to measure the performance of the top 30 large-cap securities selected based on the alpha score from the NIFTY 100 index. The weight of each stock in the index is based on the combination of the stock's alpha score and its free float market capitalization.

While Nifty200 Alpha 30 index includes the top 30 companies from its parent Nifty 200 index, selected based on their ‘quality’ scores. The stock weight is capped at 5%. The index can be used for a variety of purposes such as benchmarking, and the creation of index funds, ETFs, and structured products.

Although, Adani Total Gas and Adani Transmission are included in Nifty High Beta 50.

Adani Group stocks were under pressure since January 24 after a US-based short seller Hindenburg's report accused the conglomerate of fraud and stock manipulation.