Trent likely to replace Bajaj Finserv in Sensex rejig in December

Bajaj Housing Finance's impressive stock market debut has brought cheer to the 100-year-old Bajaj group, but the conglomerate faces the prospect of Bajaj Finserv being removed from the benchmark Sensex index.

According to market expectations, Trent, a Tata group-owned fashion retailer, is likely to replace Bajaj Finserv during the upcoming index rebalancing in December.

If this happens, Bajaj Finance will be the sole remaining Bajaj group stock in the 30-share Sensex, following the removal of Bajaj Auto in December 2021.

The review period for rebalancing of Sensex ends on October 31. The changes are likely to be announced in the latter part of November. And, they will become effective from the close of trading on December 20.

“Over 70 per cent of the way through the review period, we see one potential index change with Bajaj Finserv in the deletion zone. Trent, ONGC, Coal India, Bharat Electronics and Bajaj Auto all rank within the top 30 stocks. With sector balance coming into play, we expect Trent will be added to the Sensex replacing Bajaj Finserv,” said analyst Brian Freitas of Periscope Analytics who publishes on Smartkarma.

Shares of Trent have jumped 3.6 times over the past one year.

The stock will also be added to the Nifty 50 index on September 30, which will lead to passive inflows of nearly Rs 4,200 crore into the stock.

Inclusion in the Sensex will lead to passive buying to the tune of Rs 3,734 crore in Trent, according to Freitas.

In the event of deletion, Bajaj Finserv will see passive outflows of Rs 2,127 crore.

Shares of Trent last closed at Rs 7,329, up 1.4 per cent, valuing the retailer at Rs 2.6 trillion. Shares of Bajaj Finserv fell 1.9 per cent to end at Rs 1,858, giving it a market cap of Rs 2.7 trillion.

Index providers, however, take into consideration only the free float index for inclusion and exclusion of stocks.

Given the low promoter holding of just 37 per cent, Trent’s average free float market cap during the review period is Rs 1.32 trillion.

With promoter holding of almost 61 per cent, Bajaj Finserv free float mcap is Rs 80,540 crore. Currently, it ranks 43rd when it comes to free float mcap, while Trent rank’s 25.

Zomato’s average free float mcap is greater than even Trent at Rs 1.44 trillion.

However, the stock is ineligible to be included in the index as it is currently not part of the futures and options (F&O) segment, a prerequisite.

Last month, the Securities and Exchange Board of India (Sebi) notified stricter criteria for selection of stocks in the F&O segment. The new criterion is expected to result in a huge current list of 180 stocks.

“If Zomato and Jio Financial Services are added to the F&O segment of the market by October-end (or even prior to the announcement of the index changes), the rankings will change. Zomato could be added to the index, replacing Bajaj Finserv. Trent could also be added to the index if JSW Steel drops another rank to 40 or lower,” said Freitas.