 "Britannia may dislodge HPCL or Bharti Infratel from Nifty 50 index")
Britannia Industries could soon make its way into the benchmark Nifty 50 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 capitalisation of Britannia, a key criterion for inclusion in the index, is much higher than HPCL and Bharti Infratel.
A 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. The other stock coming close to being excluded from the Nifty is Bharti Infratel. HPCL was inducted into the Nifty just above a year ago, in September 2017.
Therefore, if HPCL is not excluded, Bharti Infratel may have to be removed for the 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. Data for the 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 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, shows data provided by the brokerage.
During a previous review in August 2012, JSW Steel had replaced Lupin in the Nifty index.
