Life Insurance Corporation of India (LIC) is unlikely to be included in the benchmark FTSE, Sensex and Nifty-50 in the near term, Edelweiss Alternative Research said in a note on Wednesday. However, the insurer, which recently filed for the country’s largest issue, will likely find an early entry in the MSCI index, it added.
We believe that FTSE Index inclusion shouldn’t happen before the September 22 review. Also, we don’t see stock entering Sensex and Nifty 50 Index in the near term as criteria’s for those indices are more stringent,” said Edelweiss.
The brokerage said the free-float market capitalisation works out to be Rs 53,500 crore on the lower end, whereas the market capitalisation is expected to be around Rs 10.7 lakh crore, as suggested by media reports. After excluding lock-in shares, the issue’s free float considered by index providers won’t be 5%, but around 3.5%, while the free-float market capitalisation would be Rs 37,100 crore or $4.98 billion, the report stated.
The free float market capitalisation of LIC will be lower, which may reduce the weight in most indices. The inclusion in the MSCI index is likely to happen first in comparison with other indices. However, it might still take up to three months. The FTSE review happens in September while Sensex and Nifty-50 have more stringent criteria,” Deepak Jasani, head of retail research, HDFC Securities, told FE.
Analysts are of a view that in the case of larger issuances, index providers do not compulsory require minimum length of trading requirement or foreign inclusion factor of 0.15. However, they highlighted that if the market capitalisation of LIC slides below Rs 10.7 lakh crore on the listing, the inclusion of the issue in indices will face hurdles.