The NSE announced a realignment of its indices earlier this month. A report by Business Standard noted that while the insertion of Adani Enterprises (AEL) and exclusion of Shree Cement from the Nifty50 Index grabbed headlines; little or no attention was paid to the rebalancing of the Nifty Next 50 Index. However, analysts believe the changes announced could have a significant bearing on stock prices, it added.
It is important to note that the Nifty Next 50 is the second-most important index after the Nifty50 as quite a number of exchange-traded funds (ETFs) track these two indices. Both these indices together form the Nifty 100 Index.
On September 1, NSE Indices announced seven changes to the Nifty Next 50 Index, which will come into effect from September 30, informed the report. However, it stated that ETFs and index funds will need to trade on September 29 to align their portfolios.
The stocks added to the Nifty Next 50 index include Adani Total Gas, Bharat Electronics (BEL), Hindustan Aeronautics (HAL), Indian Railway Catering and Tourism Corporation (IRCTC), Mphasis, Motherson Sumi Systems, and Shree Cement, the BS report informed. Meanwhile, it added that AEL, Jubilant FoodWorks, Lupin, Mindtree, Punjab National Bank, Steel Authority of India, and Zydus Lifesciences had been removed.
“Given this index is often overlooked, there could be significant price moves in these stocks over the next couple of weeks,” said analyst Brian Freitas of Periscope Analytics, in a note on September 2, adding, “While the impact is over a day of average daily volume to trade for most stocks, the impact is significantly higher in terms of delivery volume.”
According to the report, Adani Total Gas (estimated inflows of ₹426 crore), BEL ( ₹407 crore), and HAL ( ₹205 crore) will be the most impacted in terms of passive inflows.
Meanwhile, Jubilant FoodWorks (estimated outflows of ₹255 crore), Mindtree ( ₹224 crore), and Lupin ( ₹172 crore) could see maximum outflows, observes Freitas.
Experts say all stocks could see high volatility in the run-up to September 29. While most stocks removed from the index are currently trading close to their 52-week lows, stocks added have been standout performers this year, stated BS.