Technical Analysis of Indian Equities by Nooresh

Nifty Calculator June 2016 and Interesting Observations

Nifty Calculator - Weightages as per 31st May 2016. 

Do your calculations quickly to get your guesstimate of Nifty

Quick Observations

Top 10 stocks = 54% of Nifty        This has seen a shift from 55-56%

Top 20 stocks = 73.7% of Nifty        This has seen a shift from 75-78%

Top 5 stocks = Infosys , HDFC Bank, ITC Limited, HDFC Limited. Reliance Industires measure up to 34.74% of Nifty.

The bottom 5 stocks of Nifty have free float lesser than the top 5 stocks of Nifty next 50 and 2 of which could go out in the next review.

Bharat Heavy Electricals Ltd. 10912.62 0.37
Idea Cellular Ltd. 12830.28 0.43
Tata Power Co. Ltd. 13364.25 0.45
Hindalco Industries Ltd. 13475.06 0.45
Bank of Baroda 13490.39 0.45

The Top 5 Nifty Next 50 stocks out of which can become part of Nifty in the next review in September/October.

Indiabulls Housing Finance Ltd. 21796.16
Indian Oil Corporation Ltd. 20205.42
Godrej Consumer Products Ltd. 18681.02
UPL Ltd. 17866.37
Shriram Transport Finance Co. Ltd. 17139.99

 

When does Nifty Review ?

  • The periodic review of Nifty 50 is done semi-annually.
  • Its meets the impact cost criteria and is twice the free float market capitalization of the constituent with the lowest free float market capitalization.
  • No of changes in a year is limited to 5

Source                                                                                      https://www.nseindia.com/content/indices/Nifty_Broad_Market_Indices_Methodology.pdf 

Due to this limit of only 5 changes in a year there can only be 2 more changes in this year as 3 took place in April. So next change would be in September/October.

Sectoral Weightage

Sectors Weight %
FINANCIAL SERVICES 30.29
IT 16.63
AUTOMOBILE 11.36
ENERGY 10.75
CONSUMER GOODS 10.14
PHARMA 6.8
CONSTRUCTION 4.05
CEMENTS 3.14
TELECOM 2.65
METALS 2.43
MEDIA 0.81
SERVICES 0.59
INDUSTRIAL MANUFACTURING 0.37

 

Thoughts to Ponder on

  • PSU Banks weightage is now only 2.58% (SBI and Bank of Baroda) out of which Bank of Baroda could also be out of the Index in next 1 yr you never know.
  • Financial Services are 30% + of the index and generally everyone values it at Price to Book and other parameters and not P-E . Reduction of Low P-E PSUs to majorly Private Banks and Private Financials that generally quote at high P-E, does it imply a higher base P-E for Nifty for coming years ?

 

 

Nooresh Merani

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Article by Nooresh Merani

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{ 3 comments… add one }
  • Jigs June 6, 2016, 19:11

    Very valid points Nooresh. Current Nifty composition as you say has about 60% stocks from low-beta sectors (PVT Banks/IT/Pharma/FMCG/2-Wheelers) which is why some strategist in 2015 argued Indian Market is low-beta (High ROE/Defensive) pick within EM universe which has lot of countries with huge volatility (Russia, Brazil etc).
    I personally was wrong as I did not accept this argument till Feb 2016 happened. But, now I guess that is playing out when Nifty is refusing to correct even after rising sharply since budget day. Once Smallcaps catch up market may enter in true bull orbit.

    Reply
    • Nooresh June 13, 2016, 10:34

      Hi Jigs,

      The composition of Index makes it difficult to move a lot 🙂 . Have been saying so for quite some time.

      Time to be stock specific and look out for new sectors.

      Reply
  • Satish June 9, 2016, 15:13

    really interesting Observations. The Banking sector anyway going loose out due NPAs

    Reply

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