Zee Entertainment Enterprises, Bharti Infratel and GAIL are likely to be excluded from Nifty50 in the forthcoming rebalancing in September 2020.
The Nifty50 broad-based index is reviewed twice every year based on six-month data ending January 31 and July 31. Eligibility criteria for newly-listed security are checked based on the data for a three-month period instead of a six-month period.
Zee Entertainment Enterprises, Bharti Infratel and GAIL are likely candidates for exclusion from Nifty50 Index, said IDBI Capital in its rebalancing report dated July 30.
These were only companies in the index from their respective sectors - Zee from media sector, Bharti Infratel from telecom infrastructure and GAIL from gas distribution segment.
Meanwhile, to replace the exclusions SBI Life Insurance Company, Divis Labs and Dabur India are likely candidates for inclusion in Nifty50 index, said IDBI Capital.
In fact, if it happens as per expectations, SBI Life could be the first insurance company to be added to the benchmark index.
The index represents 50 stocks selected from the universe of NIFTY 100 based on free-float market capitalisation and liquid stocks having average impact cost of 0.50 percent or less for 90 percent of the observations for a basket size of Rs 10 crore.
The constituents should have derivative contracts available on NSE, which infact, is the key condition to get any stock added in Nifty50.
At the time of index reconstitution, "a company which has undergone a scheme of arrangement for corporate event such as spin-off, capital restructuring etc. would be considered eligible for inclusion in the index if as on the cut-off date for sourcing data of preceding six months for index reconstitution, a company has completed three calendar months of trading period after the stock has traded on ex basis subject to fulfilment of all eligibility criteria for inclusion in the index," said the brokerage.
The Nifty indices are computed using a float-adjusted weighted market capitalization methodology. The methodology also takes into account constituent changes in the index and corporate actions such as stock splits, rights issuance, etc., without affecting the index value.
Eligibility Criteria for Selection of Constituent Stocks:
The stock to be added should meet the impact cost criteria and its free-float market capitalisation should be 1.5x of the free-float market capitalisation of the smallest constituent in Nifty50, the brokerage said.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.