Nifty semi-annual review - No changes expected

Following are the eligibility requirements for a stock to be included in Nifty 50 :
  1. The security should have traded at an average impact cost of 0.50% or less during the past six months for 90% of the observations for portfolio of INR10cr.
  2. Stock should be part of Nifty 100 index before inclusion of Nifty 50.
  3. Free-float market capitalisation is 1.50x the free-float market capitalisation of the smallest constituent in respective index.
  4. Stock must be available for trading in NSE’s Futures & Options segment.
  5. The company must be domiciled in India and trade on the NSE.
  6. The company’s trading frequency should be 100% in the past six months
Nifty index is reviewed every six months (on half-yearly basis) and a four weeks' notice is given to the market before making changes to the index set.  Last change was done in Feb 2019 and change was implemented in March 2019. We expect changes to be announced in last week of August 2019 with effective changes from start of Oct expiry on 27 Sept, 2019

After analysing the list for potential inclusions, RBLBANK which could have been an inclusion candidate still falls short vis-à-vis ZEEL which was the nearest for exclusion in terms of six months’ average float market capitalisation. RBLBANK’s six months’ average float market capitalisation is ~1.2x ZEEL’s versus 1.5x requirement. As this analysis covers nearly 90% of observations in terms of trading days, we do not expect the above equation to change. 

Another scenario wherein RBLBANK could have been included in the index would have been on back of IBULHSGFIN’s exclusion owing to its proposed merger with LAKSHVILAS. However, such a scenario would have emerged in the event of the scheme of merger receiving equity shareholders’ approval.

Hence, We expect no changes in the composition of the Nifty Index in the semi-annual review scheduled for last week of August 2019.

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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