Technical Analysis of Indian Equities by Nooresh

Nifty 50 – Another set of exclusions/inclusions possibly coming in next 1 year.

Recently had written a few articles focusing on Nifty from different angles like technicals , p-e , Global Indices etc.

I have consolidated the same into an e-book.

In a periodic review NSE removed PNB, Vedanta, Cairn India and replaced it with Aurobindo Pharma, Bharti Infratel, Eicher Motors and Tata Motors DVR. Link to the article.

Over the next  1 year we could see some more stocks being excluded from Nifty and replaced by others.

The easiest way to check which are the stocks that stand a chance to get into Nifty is to look at Nifty Junior which has been rebranded as Nifty Next 50.

So as of yesterdays prices.

The last 5 stocks as per Free Float Weightage on Nifty 50. The recent 3 entries also come under review again.

Stock Name Free Float
BHEL 9594
HINDALCO 10869
TATA POWER 10727
ACC 11628
IDEA CELLULAR 11641

 

The top stocks which stand a chance to make it to Nifty 50 from Nifty next 50.

Stock Name Free Float
INDIABULLS 19797
INDIAN OIL 18704
BRITANNIA 16596
GODREJ CONSUMER 16316
TITAN 14234
DABUR INDIA 14132
ASHOK LEYLAND 13830
LIC HOUSING 13813
UPL 13201
MARICO 12945
DIVIS LABORATORIES 12902
JSW STEEL 12559
UNITED SPIRITS 12270

If you notice all the above stocks have a free float market cap more than the last 5 constituents of Nifty 50. The reason they do not make it into Nifty 50 is the following condition in the methodology of Nifty 50 Eligibility Criteria.

  • Companies eligible for inclusion in the Nifty 50 must have at least twice the float-adjusted market capitalization of the current smallest index constituent.

Due to the above criteria have not included the bottom 10 of Nifty but stocks like - Idea Cellular , Bank of Baroda, Gail India, Ambuja Cements, Bosch Limited and Tata Steel would also come under the exclusion radar as free float market cap is equal to the above stocks of Nifty next 50.

Some more criteria.

  • Timing of Changes: The index is reviewed semi-annually, and a four-week notice is given to the
    market before making any changes to the index constituents.
  • Additions: The complete list of eligible securities is compiled based on the float - adjusted market
    capitalization criteria. After that, the liquidity (impact cost) and float - adjustment filters are applied to
    them, respectively. The top ranking companies form the replacement pool. The top stocks, in terms of size
    (float-adjusted market capitalization) are, then, identified for inclusion in the index from the replacement
    pool.
  • Deletions: Stocks may be deleted due to mergers, acquisitions or spin-offs. Otherwise, as noted above,
    twice a year a new eligible stock list is drawn up to review against the current constituents. If this new list
    warrants changes in the existing constituent list, then the smallest existing constituents are dropped in
    favor of the new additions.

So going ahead in the next 1 year any sharp drops or rallies in above stocks will see a good set of churn as there a bunch of stocks in the free float market cap of 10k-20k crores.

TECHNICAL ANALYSIS TRAINING SESSION - MUMBAI 19-20th March -

As the seats were limited to 15-20 the batch is full.

Will be having another session in April in Mumbai and Bangalore ideally by May 2nd week. Will put up schedule this weekend.

Article by Nooresh Merani

Nooresh has written 2594 articles.

You can follow Nooresh Tech on Facebook and Twitter here.


{ 1 comment… add one }
  • Sameer March 18, 2016, 16:49

    Sometimes it seems the building a Nifty is just like Portfolio Management where the stock with expectation are included and other are discarded.

    Reply

Leave a Comment