Sensex Rejig: Trent, BEL To Replace Nestle, IndusInd — Check Inflow Estimates
The rejig will be effective from Monday.
India's oldest bourse, BSE, has revised the constituent list in the benchmark 30-share Sensex, which will see two stocks being replaced. The rejig will be effective next Monday, and the capital inflows and outflows are expected to happen on June 20.
Bharat Electronics Ltd. will be added, with an anticipated inflow of $345–354 million or around Rs 2,995 crore to Rs 3,073 crore, representing 2.5 times its average daily volume, according to IIFL Capital Services and Nuvama Alternative. A darling of the Street from the defence pack and a part of BSE 100, BEL shares have surged nearly 33.5% in the last six months.
The other entrant is Tata Group apparel retailer Trent Ltd., which could see inflows of $290 million to $ 304 million or Rs 2,900 crore to Rs 3,040 crore, equating to 4.5 times its ADV. The stock, which has fallen 19% in the last six months, is currently part of the BSE 100 index of large-cap stocks.
Nestle India Ltd. is slated for deletion, with an estimated outflow of $209 million to $ 220 million or Rs 1,815 crore to Rs 1,910 crore, a substantial 8.1 times its ADV. The stock has risen 7.34% in the last six months.
Under a cloud of suspected fraud and corporate governance concerns, IndusInd Bank Ltd. will be excluded from the Sensex, potentially facing outflows of $132 million to $ 134 million or Rs 1,146 crore to Rs 1,163 crore, which is one time its ADV.
Index rejigs are a key event for the market because they help the market participants gauge the direction in which the funds are moving. The periodic rebalancing of the Sensex ensures the benchmark index remains representative of India's evolving market dynamics.
When an index is re-organised, exchange-traded funds and mutual funds that track that index perform a rebalancing exercise. This is crucial for them to re-align their portfolios with the new composition of the index.
Essentially, the index's constituents are adjusted to maintain the intended asset allocation proportions or to keep the overall risk level consistent with the index's predefined methodology.
The rebalancing activity usually begins days before the date the changes are implemented.
