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    This Adani group stock may replace Shree Cement in upcoming Nifty rejig

    Synopsis

    "The ‘look-through earnings’ of the Nifty50 will drop as Shree Cement’s free float earnings for FY22 stands at Rs 800 crore or 4 times that of Adani Enterprises’ free float earnings for FY22. The FY22 PE of the Nifty50 index will increase 0.9 per cent to 24.3 times while the FY22 RoE of the index will dip marginally by 3 bps to 14.69 per cent," ICICI Securities said.

    This Adani group stock may replace Shree Cement in upcoming Nifty rejigTNN
    Adani Enterprises is likely to replace Shree Cement in the forthcoming Nifty50 rejig, which could lead to Rs 1,760 crore buying from Nifty50 ETF funds in the former and Rs 630 crore outflows in the latter, ICICI Securities said in a note.

    The semi-annual changes to the index will be announced in August and the changes will come into effect from September 30.

    Such changes will take into account the average free float (FF) market capitalisation for the period February-July.

    "While three stocks have qualified on free float market cap criteria, Adani Enterprises edges out in terms of being in the F&O list and is the most likely candidate to replace Shree Cement," the brokerage said.

    The impact of any such change would be a marginal dip in return on equity (RoE) and higher PE for Nifty50.

    "The ‘look-through earnings’ of the Nifty50 will drop as Shree Cement’s free float earnings for FY22 stands at Rs 800 crore or 4 times that of Adani Enterprises’ free float earnings for FY22. The FY22 PE of the Nifty50 index will increase 0.9 per cent to 24.3 times while the FY22 RoE of the index will dip marginally by 3 bps to 14.69 per cent," ICICI Securities said.

    All eyes are on the HDFC-HDFC Bank merger as the semi-annual review will be dwarfed by the impact of the impending HDFC merger.

    The merger-related changes to the index will depend on the date of shareholders’ approval, hence no definite timelines can be indicated at this point in time, ICICI Securities said.

    Past example of a corporate restructuring for Grasim and related index change indicates a time lag of less than one month from the date of shareholders’ approval to the announcement of exit from the index,

    "The HDFC merger will likely result in an unprecedented 14 per cent of the Nifty50 weight (HDFC Ltd plus HDFC Bank) getting replaced by two new incoming stocks with a combined weight of 1 per cent and the remaining 13 per cent weight getting distributed amongst the existing 48 stocks in the index at that time," ICICI Securities said.

    On the basis of the current Nifty50 ETF AUM of Rs 1.7 lakh crore, the HDFC merger-related index changes can potentially result in buying and selling of stocks worth above Rs 48,000 crore based on July end-prices. Sensex ETFs have another Rs 88,000 crore AUM and could see a similar action as in the case of Nifty50 due to the imminent merger of HDFC, the brokerage said.

    (Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)








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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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