Britannia Industries may dislodge HPCL or Bharti Infratel from Nifty

Food company Britannia Industries could soon be included in the benchmark Nifty index. According to an analysis by ICICI Direct, oil marketer Hindustan Petroleum Corporation (HPCL) or telecom tower company Bharti Infratel could be excluded from the index to make way for the Wadia group flagship firm. The free-float market capitalization, a key criterion for index inclusion, of Britannia is much higher than HPCL and Bharti Infratel.

The review of the Nifty indices is slated for next month.

In the past six months, the average free-float market cap of Britannia has been Rs 35,748 crore, while that of HPCL and Bharti Infratel has been Rs 18,060 crore and Rs 22,615 crore, respectively.

“Considering the average free-float market capitalisation since August 1, 2018, Britannia is most likely to replace HPCL in the Nifty 50 index. Other stock that is coming close to being excluded from the Nifty is Bharti Infratel. HPCL was inducted into the Nifty just more than a year back in September 2017. Thus, if HPCL is not excluded, Bharti Infratel may pave the way for inclusion of Britannia in the Nifty,” said ICICI Direct in a note on Tuesday.

Shares of Britannia rose 1.7 per cent on Wednesday, even as the benchmark indices slipped more than a per cent.

Inclusion in Nifty or Sensex leads to buying interest in the stock from exchange traded funds (ETFs) that track these indices.

The Nifty index is reconstituted semi-annually. The data for six-month period ending January and July is taken into consideration for the review. While the changes come into effect from April, the announcement is made in advance—typically in February—for derivative trading related adjustments.

ICICI Direct says a stock to be included in the Nifty needs to have at least 1.5 times the free float market capitalisation of the stock that is to be excluded. Britannia’s average free-float market cap for the past six months is over 1.5 times higher than both HPCL and Bharti Infratel, data provided by the brokerage shows.

During the previous review in August 2012, JSW Steel had replaced Lupin in the Nifty index.