scorecardresearchAdani Enterprises to replace Shree Cement in Nifty 50 stocks: How does a stock enter the Index?

Adani Enterprises to replace Shree Cement in Nifty 50 stocks: How does a stock enter the Index?

Updated: 07 Sep 2022, 02:40 PM IST
TL;DR.
From September 30, Adani Enterprises will replace Shree Cement in the Nifty 50 index. To understand, how a stock is included in the index, go through the article.
From September 30, Adani Enterprises will replace Shree Cement in the Nifty 50 index. 

From September 30, Adani Enterprises will replace Shree Cement in the Nifty 50 index. 

Adani Enterprises' stock rose 4% in Friday's intraday trading on the National Stock Exchange, resulting in a record high of 3.369 for the company's shares. The spike happened when the NSE revealed that the company had been included to the prestigious Nifty 50 index.

The Nifty50 is the most prominent index of the National Stock Exchange of India Limited. It assesses the performance of 50 blue-chip equities, which are the most dependable and liquid among Indian securities.

The 50 stocks form an effective portfolio out of the approximately 1600 businesses listed and traded on NSE since they span important areas of the Indian stock market including financials, utilities, energy and technology.

From September 30, Adani Enterprises will replace Shree Cement in the benchmark index, the most widely followed stocks gauge in the nation.

Speaking of that,

The index's constituents change over time; existing companies are dropped if their performance continues to decline, while new ones are included when they routinely meet requirements for the inclusion.

How is a stock included in Nifty 50?

The Nifty 50 index is open to all common shares listed on the NSE that are of an equity character and not of a fixed income type. Convertible stock, rights, bonds and preferred stock with a set return are not eligible.

To be included in the index, the stock must have traded at an average impact cost of 0.50% or less during the previous six months for 90% of the observations for a portfolio of Rs. 2 crores. Impact cost is the price associated with carrying out a transaction involving a security in proportion to that security's index weight as determined by market capitalization at any given time.

Companies must have at least twice the float-adjusted market capitalization of the lowest index participant to be eligible for inclusion in the Nifty 50.

Additionally, if a firm launches an initial public offering (IPO), and satisfies the standard eligibility requirements for the index (impact cost, float-adjusted market capitalization for a three-month period instead of a six-month period), it may be included in the index. The company's trading frequency during the previous six months should have been 100%.

The whole list of securities that qualify is collected. Following that, the filters for liquidity and float - adjustment are applied, respectively. The replacement pool is made up of the top-ranked businesses. The largest stocks (measured by float-adjusted market capitalization) are then selected from the replacement pool to be included in the index.

The index is reviewed every six months, and any changes to the index's members are announced to the market four weeks in advance.

Due to mergers, acquisitions, or spin-offs, stocks may be deleted. Otherwise, as mentioned above, a fresh list of suitable stocks is created twice a year to compare to the present components. The smallest current constituents are eliminated if this new list justifies making modifications to the current constituent list.

India Index Services and Products, owns and operates 67 indices under the Nifty brand, including the Nifty index. The Index Maintenance Subcommittee, which IISL has established, is responsible for making all decisions about inclusions and exclusions in the index.

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First Published: 07 Sep 2022, 02:40 PM IST