- Wealth PMS
NSE’s Index Maintenance arm, IISL, has changed the Nifty 50 Index – the top 50 stocks by free float market cap which form the benchmark index with the following exclusions. (From April 1, 2016)
This is annoying. There are supposed to be 50 stocks in an index named, for goodness’ sake, Nifty 50. The index name was specifically changed from “CNX Nifty” to “Nifty 50” in November 2015, just three months ago! The significance of the number 50 was: there are 50 stocks in this index.
And now you have 51?
This is stupidity because now a lot of algorithms have to be changed, which assumed, perhaps naively, that the Nifty 50 would have only 50 stocks.
And the 51st stock is: The Tata Motors DVR.
This is a differential voting rights share of Tata Motors. Which is already in the Nifty!
Why would you have BOTH the Tata Motors share and it’s DVR in the same index? This sounds like utter nonsense – you could just consider the DVR as a part of the marketcap of the Tata Motors share and still retain 50 stocks.
Other changes: Removing Cairn and Vedanta makes sense as their free float market cap was under Rs. 9000 cr. after their steep fall – replaced by Eicher and Infratel (who have more than 20,000 cr. in free float market cap). This also shifts the index more towards an industrial outlook rather than the commodity plays that Cairn and Vedanta are.
The new changes – and note that the numbers change for the major indexes: