The inclusion of InterGlobe Aviation and Max Healthcare in Nifty 50 is likely to drive positive price movement in these stocks. Effective Tuesday, these companies will replace IndusInd Bank and Hero MotoCorp in the benchmark 50-stock index.
A report by Nuvama Alternative & Quantitave Research estimates the cumulative flow for all passive indices. According to it, Indigo will attract flows worth $362 million and Max Health $340 million. SBI will see inflow of $80 million on account of weightage change.
What did Divyam Mour say?
Citing data from April 2018, Divyam Mour, Research Analyst, SAMCO Securities said, such inclusions have delivered favourable returns, with more than a 50% probability of generating gains across multiple time horizons.
“This phenomenon is largely attributed to the increased visibility, credibility, and liquidity benefits that come with being part of the benchmark index,” he said adding that inclusion often leads to higher institutional participation, particularly from passive funds and exchange-traded funds (ETFs) that are mandated to replicate the index composition, thereby creating sustained buying pressure.
What will be excluded from the index?
Meanwhile, top outflows estimated by Nuvama will be from shares of Hero MotoCorp worth $284 million, IndusInd Bank $205 million as these will be excluded from the index. On weight change, ICICI Bank will see $57 million outflow, Reliance $52 million and HDFC Bank $52 million.
On Monday, share price of Indigo closed 0.2% up, Max Healthcare down 1.6%, Hero MotoCorp was 0.3% up and IndusInd Bank settled 3.1% higher.
Samco’s data shows that among past inclusions, Divi’s Laboratories stood out as the strongest performer, delivering a 59% return within a year of its addition to the index while Adani Enterprises was the weakest, underperforming significantly due to the overhang of the Hindenburg report released during that period.