Radhakishan Damani’s Avenue Supermarts (DMart) or Naukri.com’s parent company Info Edge (India) Ltd. could become part of the Nifty 50 pack in the upcoming semi-annual index review. Both the stocks have performed strongly over the last six months, outperforming the benchmark index. While DMart does have a higher market capitalization than that of Info Edge, the former is not included in Futures & Options which could hurt DMart’s chances of entering Nifty 50. For semi-annual index rebalancing, eligible contenders are picked on the basis of their average market capitalization in the previous six months among other factors.
Info Edge and DMart: What’s their case for Nifty 50?
“Considering the average free float market capitalization since February 1, 2021, we feel Avenue Supermart could enter the Nifty 50 if it is included in the F&O segment. While Info Edge has the second-highest average free float market cap since February 21, it is eligible to be part of Nifty being part of F&O segment,” ICICI Direct said in a note. The average free float market capitalization of Avenue Supermarts over the last six months has been Rs 44,237 crore, while that of Info Edge has been Rs 38,903 crore.
Since the beginning of this year, Avenue Supermarts share price has jumped 19.82% to trade at Rs 3,342 per share. On the other hand, Info Edge share price has zoomed 13% to trade at Rs 5,379 apiece. Nifty index is reconstituted semi-annually considering six months’ data ending January and July. “The replacement of stocks in the Nifty 50 (if any) is generally implemented from the first working day of April and October. In case of any replacement in the index, a four weeks’ prior notice is given to market participants,” ICICI Direct said.
Making space for any possible inclusion, ICICI Direct believes India Oil Corporation or Coal India could exit. “IOC has the lowest free cap of the last five months, which is likely to be out of Nifty in the coming review,” they added. Indian Oil has had an average free float market cap of Rs 25,291 crore over the last six months while Coal India’s average free float market cap has been Rs 29,397 crore.
If the expected changes take place, Nifty’s sectoral weightage could also shift. “With the likely inclusion of Info Edge, the weight (of technology stocks) is likely to move up further. Total number of stocks from these (BFSI and Technology) sectors will be 17 effective October. Based on the current index methodology, we feel stocks from the oil & gas space would move out as the lowest average free float candidate is from this sector and new entrants would be in technology space,” they added.
Earlier, brokerage firm Edelweiss Securities had also predicted either DMart or Info Edge to be the next Nifty 50 member. Edelweiss had noted that Info Edge’s inclusion in the Nifty 50 index could result in a weightage of 55 basis points translating to inflows worth $110 million. Meanwhile, if DMart is added to the index it will see a weightage of approximately 72 basis points resulting in inflows worth $140 million.