Shriram Finance holds a strong chance to replace UPL in Nifty when the next review of the index happens in March 2024, according to estimates by Nuvama. The brokerage also sees a medium to high probability of Canara Bank replacing Bandhan Bank in the Nifty Bank index.
Shriram Finance, which has a market cap of Rs 75,215.33 crore, has surged nearly 50% over the last 12 months as against the 23% drop seen in UPL share price during this period. In the meantime, the returns by Nifty have been 13%.
Shriram Finance has not just outperformed the broader Nifty, its returns trump UPL’s by 70%.
Currently part of the Nifty Next 50 index, its inclusion is likely to result in passive inflows of Rs $217 million, as per the estimates of Nuvama. Meanwhile, UPL’s exit is likely to result in outflows of $114 million.
Canara Bank’s entry into Nifty Bank hinges upon the gains, it has accrued over the 1-year period amassing 40% while Bandhan bank has witnessed a price erosion of over 3% during this period.
Canara Bank’s inclusion will likely result in inflows of $51 million while Bandhan Bank’s exclusion could result in outflows of $39 million, the report said.
However, the caveat is that Canara Bank should have traded above Rs 440.
The market cap cut-off date is January 31 while the announcement date is expected to the later half of February and the changes become effective on March 31, the report said, adding that the analysis entails expected member reconstitution in all the passive and broader indices offered by NSE, the report added.
The brokerage also lists probable inclusions in Nifty Next 50 index viz. Jio Financial Services, Indian Railway Finance Corporation (IRFC), Power Finance Corporation (PFC), Polycab India and Adani Power. The stocks on the borderline are REC, Macrotech Developers and HDFC AMC.
Among other probable exclusions from Nifty Next 50 are Adani Wilmar, Muthoot Finance, Procter & Gamble Hygiene and Health and Bajaj Holdings & Investment. The borderline stocks are Colgate Palmolive, Bosch and Zydus Lifesciences.
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