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Financials
The Indian stock market is bracing for a significant reshuffle as the Nifty indices undergo a semi-annual rebalancing on March 27, 2025. This move, coinciding with the monthly derivatives expiry, promises to boost trading volumes as index-tracking funds adjust their portfolios. The inclusion of Zomato and Jio Financial Services in the Nifty 50 index is set to attract substantial inflows, while the exclusion of Britannia Industries and Bharat Petroleum Corporation Ltd. (BPCL) will lead to significant outflows.
Zomato Ltd.: The food delivery giant is expected to experience the largest cumulative inflow of approximately $391 million, as per some estimates[2][3]. However, Nuvama's latest assessment suggests this could reach up to $602 million[1][3]. This addition is seen as a milestone for the company, reflecting its growing influence in the Indian market.
Jio Financial Services Ltd.: This financial services arm of the Reliance group is anticipated to draw inflows of around $200 million to $308 million[1][3], marking a significant entry into the frontline index. This inclusion highlights Jio Financial's expanding footprint in the Indian financial landscape.
Britannia Industries Ltd.: Facing potential outflows of around $153 million to $238 million[2][3], Britannia's exit will see its shares reallocated from the Nifty 50 to other indices.
Bharat Petroleum Corporation Ltd. (BPCL): Expected to face outflows ranging from $145 million to $225 million[2][3], BPCL's exclusion reflects shifts in investor preferences and market dynamics.
Inflows: Stocks like Grasim Industries, Adani Enterprises, UltraTech Cement, and Cipla are expected to see their weights in the Nifty 50 rise, anticipating inflows of $9 million, $9 million, $6 million, and $5 million respectively[1][3].
Outflows: Bajaj Finance, HDFC Bank, Reliance Industries, ICICI Bank, and Infosys will see their weights in the index go down, with outflows projected at -$79 million, -$51 million, -$41 million, -$35 million, and -$24 million, respectively[1][3].
The Nifty indices' semi-annual rejig not only affects the stocks directly involved but also influences broader market dynamics. The simultaneous expiry of derivatives contracts amplifies trading activity as funds rebalance their portfolios to align with the new index constituents. This results in increased liquidity and market volatility, offering both risks and opportunities for investors.
Nifty Next 50: Stocks exiting the Nifty 50, like BPCL and Britannia Industries, will enter this index. They will be joined by other additions such as Indian Hotels Company, CG Power, Hyundai Motor India, Bajaj Housing Finance, and Swiggy[2][3].
Nifty Midcap 150: This index will see the inclusion of 17 new stocks, including Blue Star, BHEL, NHPC, Union Bank of India, and Glenmark. Conversely, Indian Hotels Company, CG Power, Tata Chemicals, and others will exit[3].
Nifty Smallcap 250: This index will add 33 stocks, such as Tata Chemicals, Delhivery, Wockhardt, and Carborundum Universal, while removing names like Blue Star, Glenmark Pharma, and NALCO[3].
Nifty CPSE: Stocks like Power Grid, BEL, ONGC, Coal India, NHPC, Oil India, Cochin Shipyard, NBCC (India), NLC India, and SJVN will see their weights in the CPSE gauge rise, while NTPC's weight will likely decrease[3].
Nifty IT: Oracle Financial Services Software will replace L&T Technology Services in the IT index[3].
The Nifty 50's forward price-to-earnings (P/E) ratio for FY26E is expected to rise from 19.9 times to 20.2 times post-rejig, reflecting increased valuations based on the inclusion of Zomato and Jio Financial Services[1][3]. Earnings per share are anticipated to slip from 1,186 to 1,171[1][3].
Investors should consider the market's response to the rejig as an opportunity to rebalance portfolios. The inclusion of new index constituents can increase their market visibility and possibly boost stock prices due to passive inflows. However, the exclusion of established players like Britannia and BPCL may lead to short-term volatility.
The Nifty indices' semi-annual rebalancing marks a significant shift in the Indian stock market landscape, influenced by the inclusion of Zomato and Jio Financial Services in the Nifty 50. As the market adjusts to these changes, investors must adapt their strategies to navigate the potential volatility and opportunities presented by this reshuffle.
