The NSE has changed the constituents of the Nifty from March 28, 2014.
- JP Associates is being replaced with Tech Mahindra
- Ranbaxy is being replaced with United Spirits
This should in general be good news for the United Spirits and TechM stocks, and bad for Ranbaxy and JP. Why? Because Index funds will have to match the portfolio and buy/sell these stocks in that manner. But they have a month to switch over.
But time will tell, and a cursory glance of previous stock changes haven’t really gone down that way. And for good reason too - the amount of money in India in Index funds is not that much (only about 1,000 cr.).
Plus, the weights of Ranbaxy and JP Associates add up to 0.5% (about 0.25% each), which is tiny. (That’s Rs. 5 crore in total, on AUM of 1,000 cr.) These stocks trade over 50 crores of value per day, so we are unlikely to see a big impact. In fact, right now, Ranbaxy is about 1% down and JP is about 3% up today.
But there’s one other impact: The Nifty EPS will rise. JP and Ranbaxy aren’t exactly hugely profitable (Both have seen losses in the last quarter) but TechM and United Spirits are. Again the impact is low because of the low weightage of these stocks.
Fintech out of IT, JustDial in
The other big index change is that Financial Technologies and Core Education Services are out of the IT index and are being replaced by Infotech Enterprises and JustDial . JustDial is a very good company but it is hardly what you would call “IT”, but I suppose given the lack of a category named “Phone Directory” they can go into IT. Also into Telecom, I suppose.
- BankNifty sees Federal Bank in, Union Bank out.
- The Midcap index adds Can Bank, Bank of India and Power Finance Corp, instead of Hexaware, HDIL and JSWSteel. (The rise of the midcap PSU?)