Index rebalancing ensures market accuracy by adjusting for factors like market capitalization, liquidity, and sector representation. Stocks that no longer meet the criteria are removed, while new ones are added, maintaining the index’s integrity and offering investors exposure to emerging large-cap companies.
What Happened
The National Stock Exchange had announced major changes to its benchmark index on February 21, 2025 where the major food delivery company, Zomato Ltd and Reliance Industries’ Non-Banking Financial company, Jio Financial Services Ltd will enter the Nifty 50 index.
While, the public sector oil and gas company, Bharat Petroleum Corporation Ltd and the FMCG giant, Britannia Industries Ltd will be exiting the Nifty 50 index. These changes will take place in the upcoming semi-annual reshuffle which is effective from March 28, 2025.
These changes have been made because the average free-float market capitalizations over six months of Zomato and Jio Financial Services Ltd are at least 1.5x that of the smallest companies being removed i.e. BPCL and Britannia Industries Ltd. The rebalancing is based on the average free float market cap from August 1st to January 31st.
The Free Float Market Cap of Zomato Ltd is Rs 1,54,010.88 crore, while Jio Financial’s is Rs 74,779.95 crore. BPCL and Britannia have market caps of Rs. 48,507.53 crores and Rs 56,495.46 crore, respectively.
Also read: Pharma stock jumps 4% after $7 Million settlement with Humana, Centene, and Kaiser
Inflows and Outflows
Nuvama Wealth Management’s Alternative & Quantitative Research estimates that Zomato and Jio Finance could see inflows of $631 million and $320 million, respectively, from inclusion in the Nifty 50 index. On the other hand, BPCL and Britannia Industries could experience outflows of $201 million and $240 million, respectively, due to their exclusion.
ICICI Securities forecasts Nifty 50 ETF funds will see buying of Rs 5,900 crore in Zomato and Rs 3,000 crore in Jio Financial Services, while selling Rs 2,300 crore in Britannia Industries and Rs 1,900 crore in BPCL.
Effect on Nifty 50 Valuations
Zomato and Jio Financial Services with trailing P/E of 320x and 96x respectively will replace BPCL and Briannia Industries Ltd whose trailing P/E ratios are 8x and 57x respectively. Because of this major change, Nifty 50 trailing P/E could inflate by 2.5 percent from 22.1x to 22.6x as per forecast of ICICI Securities. This could mean that Nifty 50 will become more expensive due to the index rebalancing.
Nifty Next 50 Changes
Seven stocks have been added to the Nifty Next 50 index: Bajaj Housing Finance, BPCL, Hyundai Motor India, Indian Hotels, Swiggy, CG Power, and Britannia. Meanwhile, Adani Total Gas, BHEL, IRCTC, Jio Financial, NHPC, Union Bank, and Zomato have been excluded.
Written By Adhvaitha Nayani
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
