scorecardresearchNifty criteria likely to be tweaked before RIL's financial services arm

Nifty criteria likely to be tweaked before RIL's financial services arm demerger: Report

Updated: 13 Apr 2023, 01:49 PM IST
TL;DR.

A stock is required to be removed from Nifty at the time of demerger but NSE Indices plans to remove this clause. This change will prevent RIL’s exclusion from Nifty, stated BS.

NSE is one of the largest stock markets in India. 

NSE is one of the largest stock markets in India. 

Ahead of the proposed demerger of Reliance Industries' (RIL’s) financial services arm, the National Stock Exchange (NSE) is likely to tweak the framework on the addition and removal of stocks in the benchmark Nifty50 index, a report by Business Standard stated.

The report noted that under the present rule, which requires a Nifty constituent to be excluded in the event of its demerger, index heavyweight RIL would have to be removed, which might lead to selling to the tune of 20,000 crore by passive funds, which track the widely popular Nifty50 index.

However, NSE Indices plans to remove this clause. This change will prevent RIL’s exclusion from Nifty, stated BS.

It further informed that with a market cap of 15.9 trillion, RIL has the highest weighting of 9.9 percent in the 50-share index, which is tracked by exchange-traded funds and index funds with assets of over 2 lakh crore.

The company has already initiated a demerger process and the scheme is to be put to the vote before shareholders and creditors on May 2. The demerged entity, Jio Financial Services, is expected to list separately on the bourses by September 2023, mentioned BS.

“NSE Indices will soon float a discussion paper on the treatment of a stock undergoing a scheme of demerger. Following this, the index computation methodology will be revised to avoid unnecessary churn in the Nifty50 index,” a person with direct knowledge of the matter told the market daily.

 

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Index funds are mutual funds that replicate the portfolio of an entire index like Nifty50. 
First Published: 13 Apr 2023, 01:49 PM IST