If you are an investor or trade in Indian markets, you must surely be sniffing through Nifty and Sensex changes before your coffee. Well, now imagine you have invested in a Nifty-listed company, and one fine morning, you wake up to the news of the company getting delisted. This is definitely a trader’s worst nightmare. But oftentimes, companies on the NIFTY 50 go through the process of listing and delisting.
If you want to know which companies were the latest addition to NIFTY 50 and which got delisted, read below.
What is NIFTY 50, and the criteria for which stocks are included or excluded from NIFTY 50?
NIFTY 50 is one of India’s top stock market indexes, constructed of 50 stocks from 13 sectors of the economy. Now, Indian indices do not follow a lottery system for stock selection. The NIFTY 50 companies are chosen based on criteria like market capitalisation, liquidity, and financial performance, reflecting overall market conditions. Investors, traders, and fund managers rely on NIFTY 50 to gauge the Indian stock market’s health.
There are specific eligibility requirements that companies must meet to make it to the NIFTY 50 Club, which are as follows:
- They must be registered with NSE
- They must have 100% trading frequency in the last six months and possess highly liquid shares.
- They should be allowed to trade in futures options
Companies with differential voting rights are also considered for the selection.
Now, NIFTY 50 gets reconstituted every six months. The changes are made according to company performance and adherence to the criteria. Corporate actions like mergers can also trigger changes in index composition. Quarterly screenings based on SEBI regulations may also lead to these changes. So, if a company no longer meets the inclusion criteria or others meet them better, it can be excluded from NIFTY 50.
Regular rebalancing ensures that only the top performers stay on the index and maintain relevance and accuracy in reflecting market dynamics.
The latest companies to join NIFTY 50
Among the latest additions to the NIFTY 50 is technology major LTIMindtree. LTIMindtree replaced the housing finance giant HDFC on the index. The change came into effect on July 13, 2023, after the merger of HDFC with HDFC Bank.
LTIMindtree’s shares opened at ₹5,373.05 apiece on BSE and reached a new 52-week high at ₹5,425 when it joined the NIFTY 50. In light of the stock’s significant rise of 33.5% in the past year, which also led to it outperforming its sector by 23.3%, its inclusion in the index is regarded as a positive move.
Another key addition to the index will be Jio Financial Services Ltd which is a demerged entity of Reliance Industries Ltd (RIL). Jio Financial Services is all set to be listed in the prestigious NIFTY 50 and 18 other indices, including Nifty 100, Nifty 200, and Nifty 500. The price discovery auction of Jio Financial Services in NIFTY 50 took effect on July 20, 2023, and looks to be added soon to the index.
Why is HDFC not a part of NIFTY 50 anymore?
After being a key member of the NIFTY 50 for several years, Housing Development Finance Corporation Ltd (HDFC) has been excluded from the index. The Index Maintenance Sub-Committee (Equity) of NSE Indices Limited made the decision because of the company’s merger with HDFC Bank. This change indicates a significant shift in the composition of the index and reflects the dynamic nature of the stock market.
Conclusion
Changes in NIFTY 50’s composition are essential to keep the index up-to-date and representative of the Indian equity market’s ever-evolving nature. It ensures that investors and traders have a relevant and accurate benchmark to track market trends and make informed decisions. Before investing in any stock, it may be wise to consult your financial advisor or planner.