Zomato, Naukri.com shares may not make it to Nifty 50 this time, but strong case for future entry

By: |
Updated: July 27, 2021 12:15 PM

New age internet shares such as Zomato and Info Edge (naukri.com) may not make it to the benchmark NSE Nifty 50 index in the impending review next month, despite having a high market capitalization.

Nifty 50Nifty 50 rebalancing may keep the index unchanged. (Image: REUTERS)

New age internet shares such as Zomato and Info Edge (naukri.com) may not make it to the benchmark NSE Nifty 50 index in the impending review next month, despite having a high market capitalization. However, Info Edge is the best possible contender for a spot in Nifty 50 in future reshuffles, ICICI Direct said in a report. Zomato too has a bright chance of making it to Nifty 50 in the future. “New large-cap internet platform companies like Zomato with high free-float market cap due to zero promoter holdings could be serious contenders for entry into the benchmark indices going ahead,” the report said.

Also Read: Zomato share price hits new all-time high, doubles from IPO price; UBS says ‘buy’, sees 12% rally

Info Edge stock: Falling short on free float

Info Edge’s average free-float market capitalisation is below that of Indian Oil — the smallest free-float market cap stock within the current Nifty 50 index. For a stock to qualify for inclusion, it should have an average free-float market capitalisation of at least 1.5 times the average free-float market capitalization of the smallest constituent in the index — where Info Edge falls short. “As per the index methodology, the investible weight factor (IWF) is determined as the amount available for trading and which is not held by entities having strategic interest in a company,” ICICI Direct said.

Entry into the benchmark Nifty 50 index is decided on the basis of a stock’s average market capitalization in the previous six months among other factors. Stocks that are currently a part of the Nifty 100 index and available for trading in NSE’s Futures & Options segment are picked for Nifty 50. 

Info Edge best placed for future entry

Info Edge is still the best-placed stock to enter the index in the next reshuffle. “Info Edge will be the first pure-play internet platform company to be included in the NIFTY50 index as and when it qualifies,” ICICI Direct said. Putting things into perspective, the brokerage firm highlighted that even the US Dow Jones Industrial Average still doesn’t have any of the internet platform companies such as Amazon or Google as part of its constituents given the limitations of it being a price-weighted index.

Zomato, internet and new-age economy stocks gearing up to dominate

Now with the advent of the internet and the new-age economy, the three best-placed stocks to enter the index are Info Edge, Radhakishan Damani’s Avenue Supermarts (DMart), and Gautam Adani’s Adani Green Energy. “All the three stocks are notably from the new-age economy sectors of internet businesses, organised discount grocery retail with e-commerce incubation, and a green energy company, respectively,” the report said. DMart and Adani Green Energy currently fail to qualify for not being a part of the F&O list.

ICICI Direct said that Nifty 50 exclusion and inclusion trends reflect the emerging pockets of demand in the economy over the long term. Between 2003-2011, the rising investment rate drove demand in the economy and bulk of the stock additions to the index were from the investment and related credit cycle of the economy. Further, between 2012-20 bulk of the additions were from the consumption side of the economy.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Exit of Gaurav Gupta does not warrant any disclosure under listing regulations: Zomato
2Analyst Corner – Auto PLI scheme: NEVs remain the centrepiece
3Corporate bond yields ease on demand from mutual funds, insurers