Titan, UltraTech Cement and Nestle India will be part of the S&P BSE Sensex from December 23 while Tata Motors, Tata Motors DVR, Yes Bank and Vedanta will exit the bellwether index.
The newcomers should bump up the earnings multiple of the benchmark given the one-year forward price to earnings (P/E) multiple for Titan is 47.37 times while for Ultra Tech Cement it is 24.13 times.
The Sensex trades at a one year forward P/E of 17.93 times with the index closing Friday’s session at 40,359.41 down by 0.53% or 215.76 points.
In the last one year, the share prices of Tata Motors and Yes Bank have declined by 10.95% and 66.86%, respectively, while that for Vedanta has come off by 28.80%.
In contrast, shares of UltraTech Cement and Titan have risen by 2.98% and 24.16%, respectively, and Nestle India has gained 39.5%.
Apart from the S&P BSE Sensex, changes were also made to another 14 indices, which includes S&P BSE 500, S&P BSE 200 and S&P BSE 100.
The changes could have been prompted by the fall in the market capitalisation of the stocks which were removed.
“With exchange-traded funds benchmarking to Nifty-based indices, where these stocks are already present, I don’t expect any major liquidity-based ETF flows into these stocks,” Vinay Pandit, head — Institutional Equities, IndiaNivesh Securities, said.
In the past few months, Tata Motors has been downgraded by rating agencies amid slowing sales in China and Europe. Brexit-related uncertainty is expected to continue to impact JLR’s performance and these near-term pressures could result in a further weakening of JLR’s sales volumes and thus, profitability.