According to various reports, Adani Enterprises, which is owned by multinational conglomerate Adani Group, would soon enter one of the benchmark indices of Indian capital markets, the Nifty 50.
Nifty 50, which was founded in 1997 is owned and managed by National Stock Exchange Indices Ltd. It is an index consisting of stocks of the largest 50 Indian companies listed on NSE. The companies are listed according to their weighted average of free float market capitalisation. As of now, 50 listed companies on Nifty 50 come from 13 different sectors.
Every 6 months, NSE conduct an index review in which stocks of underperforming companies are removed from the Nifty 50. At the same time, companies which are out of the index but are performing well, are inducted into the Nifty 50. The index is rebalanced twice every year by taking into consideration various factors.
Abhilash Pagaria, who is head of financial service company, Edelweiss Alternative & Quantitative Research, believes that in the upcoming index review, Adani Enterprises would be inducted into Nifty 50. He also added that Shree Cements, which has been underperforming in the market for the last 6 months, would be replaced by Adani Enterprises.
Performance of Adani Enterprises and Shree Cements Shares
Adani Enterprises, founded 29 years ago, saw a 51 per cent increase in its share value in the last 6 months. Share of Adani Enterprises is currently trading at 2,723.60 Indian rupees per share. On 2nd March 2022, the value of a single share of the company was 1641.80 rupees. Adani Enterprises, which is a subsidiary of Adani Group, is mainly in the business of mining and trading coal and iron ore. It is also into the business of airport management and large-scale infrastructure development.
On other hand, the share value of Shree Cements dropped by nearly 16.49% during the last 6 months. Share of the Kolkata-based cement company is currently traded at 21096 rupees.
Outflow of funds
If Adani Enterprises is indicted into the Nifty 50 of the national stock exchange, the stock is expected to attract nearly 213 million dollars towards the index. This is higher than what Edelweiss had predicted in May 2022. The financial service company had predicted an inflow of 183 million dollars in an event of entry of Adani Enterprises into Nifty 50.
If Shree Cements is excluded from the index, it would result in an outflow of nearly 87 million dollars from the Nifty 50.
Even though there has been no official confirmation or announcement from NSE regarding the index review, the announcement is expected to happen in the second half of August. The rebalancing and review of the index would reportedly happen by September 30th 2022.
Shree Cements will eventually move into the Nifty Next 50 index of the National Stock Exchange. Along with the cement company, Adani Wilmar, IRCTC, Bharat Electronics and HAL would also probably enter the Nifty Next 50 index.