Shriram Fin may oust UPL from Nifty in NSE arm’s semi-annual review

livemint.com:

Shriram Finance (SFL) could replace UPL on the Nifty 50 index while Canara Bank is likely to replace Bandhan Bank on the 12 constituent Bank Nifty index at the semi-annual review of Nifty indices , which will take effect on 31 March . The inclusions could attract net inflow of $245 million to the SFL counter and a net inflow of $36 million to Canara Bank from domestic institutions and insurance companies. UPL could also see outflows of $107 million and Bandhan Bank of $39 million, said Abhilash Pagaria, head of quantitative research at Nuvama Wealth, in a note.

UPL and Bandhan after likely exclusions will remain on the broader market Nifty 500. The official announcement is expected by February end, but Pagaria expects “signific-ant activity" at the stock counters in coming sessions . “Nifty indices rejig is set for March, and at Nuvama Alternative, we anticipate it to be action-packed.

Our high-conviction Nifty 50 entrant is Shriram Finance (with an inflow of $245 mn), while UPL (outflow of $107 mn) is expected to exit. Simultaneously, we foresee Canara Bank displacing Bandhan Bank in Nifty Bank," Pagaria told Mint. The rebalancing is part of a semi-annual review of the indices by NSE Indices Ltd, an NSE subsidiary. The cut off dates for the rebalancing are 31 January and 31 July each year.

The most important criteria for the inclusion or exclusion are the impact cost, or the cost to execute a transaction on the exchange over a prior six-month period and the average market capitalisation. Impact cost is based on the liquidity or number of buyers and sellers in the market at given times. Higher the liquidity, lower the impact cost.