Summary of this article
BSE will replace Wipro in Nifty 50 from September 30
BSE cleared the 1.5-times free-float market-cap threshold
TVS Motor and Divi’s Laboratories failed to meet the threshold
BSE shares fell as much as 1.71 per cent to Rs 3,534.60 apiece on August 11, after gaining nearly 4 per cent in the previous session following the announcement of its entry into the Nifty 50.
Wipro shares, which will make way for BSE in the benchmark, traded marginally higher above the Rs 185 level after losing nearly 1 per cent in the previous session.
The rejig will take effect from September 30, after the close of trading on September 29, according to NSE Indices.
The Number That Put BSE Ahead
BSE's six-month average free-float market capitalisation stood at Rs 1,40,879 crore, compared with Rs 55,930 crore for Wipro.
That gave BSE more than 2.5 times Wipro's free-float market capitalisation, comfortably above the 1.5-times threshold required for a new stock to replace the smallest Nifty 50 constituent.
Wipro was the smallest Nifty 50 constituent on this measure, making it the stock that could be replaced under the index methodology.
BSE shares have rallied nearly 1,100 per cent over the previous three years, while Wipro’s shares have declined over 10 per cent in the same period. Year-to-date (y-t-d), BSE has climbed nearly 28 per cent and Wipro has plunged nearly 31 per cent. On a one-year basis, BSE rose 51 per cent, while Wipro fell over 23 per cent.
Why TVS Motor And Divi's Missed Out
TVS Motor and Divi's Laboratories were also eligible candidates, but their free-float market capitalisations were not enough to secure entry.
TVS Motor's six-month average free-float market capitalisation stood at Rs 84,566 crore, while Divi's Laboratories stood at Rs 82,930 crore.
The key test was not simply whether these companies were larger than Wipro. NSE's methodology also required the potential entrant to meet the 1.5-times threshold against the relevant existing Nifty 50 constituents.
After Wipro's exclusion, HDFC Life Insurance Company and Tata Consumer Products were the two Nifty 50 constituents with the lowest average free-float market capitalisation. Their figures were Rs 65,666 crore and Rs 73,054 crore, respectively.
Neither TVS Motor nor Divi's Laboratories cleared the required threshold against these stocks. BSE did.
Why BSE Cleared The Test
BSEf's average free-float market capitalisation of Rs 1,40,879 crore was more than 1.5 times both HDFC Life and Tata Consumer Products.
TVS Motor and Divi's Laboratories, despite having higher free-float market capitalisation than Wipro, fell short of that requirement.
This is why BSE was selected even though TVS Motor and Divi's Laboratories ranked ahead of it in the list of other eligible companies.
NSE also requires stocks to be available for trading in its F&O segment to qualify for inclusion in the Nifty 50.
What Happens To Wipro
Wipro will leave the Nifty 50 after nearly three decades and move to the Nifty Next 50.
The IT major will join Hitachi Energy India, Polycab India, Vedanta Aluminium Metal and Vodafone Idea in the Nifty Next 50. These five stocks will replace Indian Hotels, Lodha Developers, REC, Shree Cement and United Spirits.
The BSE-Wipro replacement will also be reflected in the Nifty50 Equal Weight index.
Nifty 500 Gets 27 New Stocks
The Nifty 500 will add 27 stocks and remove 27 under the latest review.
The additions include Aether Industries, Avanti Feeds, Azad Engineering, CMPDI, Cupid, Embassy Office Parks REIT, Fractal Analytics, INOX India, KSB, MTAR Technologies, Sansera Engineering, Thangamayil Jewellery and four Vedanta companies.
Among the exits are 3M India, Aditya Birla Fashion and Retail, Aditya Birla Lifestyle Brands, Bayer Cropscience, Bikaji Foods, Blue Dart Express, Chalet Hotels, Pfizer, Sapphire Foods, Saregama India and Sonata Software.
Other Major Index Changes
The Nifty 100 will add BSE, Hitachi Energy India, Polycab India, Vedanta Aluminium Metal and Vodafone Idea.
In the Nifty Midcap 150, companies including Aster DM Quality Care, Embassy Office Parks REIT, FACT, Hindustan Copper, Indian Hotels, Lodha Developers, Meesho, REC and Shree Cement will enter the index.
Sectoral indices will also see changes. Hyundai Motor India will replace Exide Industries in Nifty Auto, while Grindwell Norton and MTAR Technologies will enter Nifty Capital Goods. Jubilant Ingrevia will replace Bayer Cropscience in Nifty Chemicals and Ceigall India will replace Ahluwalia Contracts in Nifty Construction.
FPI And Strategy Indices Also Rejigged
Ashok Leyland, Biocon, Hitachi Energy India, Lenskart Solutions and Vedanta Aluminium Metal will enter the Nifty India FPI 150. Ambuja Cements, Bajaj Holdings & Investment, Bank of Baroda, ICICI Prudential Life Insurance and SBI Cards will exit.
HCL Technologies will replace Persistent Systems in Nifty Growth Sectors 15, while State Bank of India will replace TCS in the Nifty Top 10 Equal Weight index.
