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Financials
The recent semi-annual rejig of the Nifty indices has brought significant changes to the lineup of companies included in the benchmark Nifty 50 index. In a move that reflects shifting market dynamics, Zomato and Jio Financial Services have been added to the prestigious index, while BPCL and Britannia Industries have been excluded. This development is expected to draw substantial passive inflows into the stocks of the newly included companies, with estimates suggesting a total of $822 million in inflows for Zomato and Jio Financial Services combined.
The Nifty 50 index, operated by the National Stock Exchange (NSE), is a key indicator of the Indian stock market's performance. It represents 50 large, well-established, and financially sound Indian companies across various sectors. The semi-annual review ensures that the index remains representative of the broader market, helping maintain its relevance as a benchmark for investors.
The inclusion of Zomato and Jio Financial Services in the Nifty 50 index is projected to attract significant investment. Zomato, the leading food delivery service, is expected to see the highest cumulative inflow of $391 million, while Jio Financial Services may attract around $200 million in passive buying[2][4]. These inflows are driven by index funds and exchange-traded funds (ETFs) that track the Nifty 50 index, as they adjust their portfolios to reflect the new constituents.
Market analysts like Mitesh Panchal suggest that Zomato could be a preferred pick for investors if it closes above ₹250, setting potential targets at ₹230 and ₹240, with a stop-loss recommended at ₹203[1]. For Jio Financial Services, he advises waiting for a weekly close above ₹240 before considering an entry[1].
On the other hand, BPCL and Britannia Industries will face significant outflows as they exit the Nifty 50 index. BPCL is likely to witness outflows of $145 million, while Britannia Industries may see outflows of $153 million[2][4]. These outflows are a result of the same index funds and ETFs adjusting their holdings by selling shares of companies that are no longer part of the index.
The reshuffle is not limited to the Nifty 50. Other indices like the Nifty Next 50, Nifty Midcap 150, and Nifty Smallcap 250 will also undergo changes. For instance, Indian Hotels Company, CG Power, and Hyundai Motor India are joining the Nifty Next 50 index, while stocks like Indian Railway Catering and Tourism Corp. (IRCTC) and Bharat Heavy Electricals Ltd. (BHEL) will exit it[2][3].
Here is a summary of the expected inflows and outflows:
Outflows:
The entry of Zomato and Jio Financial Services into the Nifty 50 is expected to have a slight impact on the index's price-to-earnings (PE) ratio. The forward PE for the Nifty 50 is projected to increase from 19.9 times to 20.2 times for FY26E, as the earnings per share (EPS) may decline slightly due to the changes in index constituents[3][4].
The semi-annual rejig offers both opportunities and challenges for investors. For those looking to capitalize on the trend:
The Nifty indices rejig marks an important milestone in the evolution of India's stock market, reflecting ongoing changes in market dynamics and investor preferences. As Zomato and Jio Financial Services join the elite club of Nifty 50 constituents, they are poised to attract significant investment. Meanwhile, the exit of BPCL and Britannia Industries underscores the competitive nature of the Indian market. As investors navigate these changes, a strategic approach to portfolio management will be crucial to maximizing returns in this dynamic environment.
