MUMBAI: The Nifty 50 is set for a likely rejig Friday, with Interglobe Aviation, the parent of the largest airline Indigo, and Max Healthcare likely entering the benchmark index, while struggling private sector lender Indusind Bank and the two-wheeler major Hero Motocorp may be on their way out of the index, according to analysts.
Changes to the Nifty 50, which counts the 50 largest companies in terms of public float and market capitalisation as it constituents, are carried out twice a year by the exchange, every March and September. The changes are based on the average free-float market capitalisation of the previous six months. The Sensex 30 index undergoes similar period changes in every July and December.
The official decision by the NSE index sub-committee is expected on August 22. If carried out, the index adjustments will be effective from September 29.
The Nifty and the Sensex recasts are always closely watched events as several passive funds that track these benchmarks could see changes in their fund flow allocations, Nuvama Alternative has said in a recent report.
If the index is rejigged, exchange-traded funds and mutual funds that track the Nifty will also rebalance their portfolios to align with the new index composition, which leads to changes in passive fund flows.
If included, according to brokerages, Interglobe Aviation may see an inflow to the tune of $600 million, while the likely inflows for the healthcare service provider Max Healthcare will be around $400 million.
The inclusions may come at the expense of Indusind Bank, which since the March accounting scam has lost more than half of its market cap, and Hero Motocorp. While the two-wheeler major may see $600 million in outflows, the troubled lender is likely to see an outflow of $230 million according to brokerages.
During the last rejig in March, Zomato and Jio Financial Services entered the index, replacing state-run petroleum major BPCL and the food major Britannia Industries.
When the Sensex was recast last May, with effective changes from July 23, the Tata group's retail arm Trent and Bharat Electronics replaced Nestle India, and Indusind Bank.
The Sensex 30, composed of the top 30 companies in free float and market cap, also gets realigned twice a year — in July and in December - based on the same principle that NSE follows—such as the free float market capitalisation.