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    HDFC Life newest Nifty member; SBI Life, Divi’s Lab, Dabur next in line

    Synopsis

    HDFC Life became the newest Nifty member on Friday, replacing Vedanta in the 50-pack.

    NSE-1---agencies
    Brokerage IDBI Capital Markets is betting on SBI Life Insurance, pharma major Divi’s Labs and FMCG firm Dabur India to make the cut.
    At least three stocks may get the boot from the Nifty50 pack in the September index review. And speculation is on as to who fits the bill best to replace them.

    HDFC Life became the newest Nifty member on Friday, replacing Vedanta in the 50-pack.

    Brokerage IDBI Capital Markets is betting on SBI Life Insurance, pharma major Divi’s Labs and FMCG firm Dabur India to make the cut.

    “They meet all the criteria for inclusion and are frontrunners,” says AK Prabhakar, Head of Research at IDBI Capital Markets.

    New entrants to the Nifty50 Club usually sees some additional demand for a while. “Data shows stocks that join the Nifty pack give 10-15 per cent return in the next 6-8 months as index-tracker ETFs shift their money to these counters,” Prabhakar told ETMarkets.com.

    Nifty comprises 50 stocks which are chosen based on free-float market capitalisation, liquidity, average impact cost of 0.50 per cent or less for 90 per cent of the observations for a basket size of Rs 10 crore. The constituents should be trading in NSE’s derivative segment.

    A new entrant is required to have a free-float market capitalisation that is 1.5 times the free-float m-cap of the smallest index constituent.

    Stocks that are widely seen as potential candidates for exit in September include Bharti Infratel, Zee Entertainment and Gail India. The broadbased Nifty50 index is reviewed twice every year based on the six-month data ending January 31 and July 31.

    SBI Life Insurance reported a 5 per cent profit growth for June quarter at Rs 390 crore against Rs 370 crore reported for the year-ago quarter.

    “SBI Life is better placed to weather the Covid-19 disruption given significant brand equity, an expansive multi-channel, pan-India distribution network, cost leadership and access to parent’s huge client base,” JM Financial said. The brokerage has a ‘Buy’ rating on the stock with a price target of Rs 1,000. It traded at Rs 908 on Friday in a depressed market.

    Dabur reported a 6.18 per cent drop in consolidated June quarter profit at Rs 341.30 crore due lower revenue from operations. If included, Dabur will be the third consecutive consumer stock addition to Nifty since 2019. Two consumer names like Nestle and Britannia replaced Indiabulls Housing Finance and HPCL last year. Shree Cement was included in the Nifty50 index on March 27, 2020, replacing Yes Bank.

    In February, brokerage ICICI Securities also projected Dabur as a likely to candidate to enter the Nifty pack. YES Bank in the 50-share pack. Global brokerage CLSA retained a ‘buy’ rating on Dabur with a price target of Rs 590 post Q1 earnings. Emkay retained a ‘hold’ rating with a target price of Rs 500. The stock traded at Rs 506 on Friday.

    “We like the management’s aggressive initiatives to drive recovery and growth, but await a better entry point as current valuations at 43 times FY22E EPS restricts upside,” Emkay said.

    Divi’s Laboratories is yet to announce its financial results for Q1FY21. The stock traded at Rs 2,622, up 2.5 per cent on Friday.

    ICICI Securities also saw a strong case for HDFC Life and SBI Life, which have higher free-float market-caps.



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

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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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