The National Stock Exchange (NSE) Nifty Next 50 Index could undergo large-scale changes if the proposed tweaks to its computation methodology get implemented, a report by Business Standard stated.
The report informed that in a discussion paper floated last week, NSE Indices proposed that only stocks that are traded in the futures and options (F&O) segment can be part of the index. Currently, as many as 11 non-F&O stocks are part of the Nifty Next 50 Index, which, as the name suggests, represents the next rung of large and liquid securities after the Nifty50, noted BS.
It is important to note that the Nifty50 and the Nifty Next 50 together make up the Nifty 100 Index. Further, being a constituent of the Next 50 is mandatory to make it to the Nifty50.
The 11 non-F&O stocks that are currently part of the Next 50 are proposed to be removed in two phases, informed BS.
In Phase I, the weights of the non-F&O stocks will be capped at 5 percent, with effect from June 29, the report highlighted. Currently, these stocks can have a maximum weight of 10 percent. Meanwhile, in phase II, which will be applied on September 28, all 11 stocks will be removed and replaced by F&O stocks, added BS.
Avenue Supermarts (DMart), Varun Beverages (VBL), Bajaj Holdings & Investment, Adani Green Energy, Nykaa, Zomato , LIC, and P&G are some stocks that will be deleted from the index.
Meanwhile, their weight will be redistributed to other index constituents. Colgate-Palmolive, Shree Cement, Pidilite Industries, SRF, and Havells India are expected to see the biggest inflows during the first phase, observed BS.
Sriram Velayudhan, vice-president, alternative research, IIFL Institutional Equities, expects outflows of ₹127 crore from DMart and ₹99 crore from VBL in the first phase.
The second phase to be implemented by the end of September is when the index will see massive churn of close to ₹5,000 crore, it added.
The 11 new stocks that will get added to the Next 50 are TVS Motor Company, Jindal Steel & Power, Punjab National Bank, Trent, Zydus Lifesciences, Shriram Finance, Indian Hotels Company, Polycab India, AU Small Finance Bank (SFB), Cummins India, and Abbott India, informed the report.
