The index committee of the Bombay Stock Exchange (BSE) yesterday made four changes in the composition of the 30-share BSE sensex.
The four new scrips that have been included in the sensex are software companies Infosys Technologies and NIIT, lubricants major Castrol and pharmaceutical firm Novartis. They replace Arvind Mills, SAIL, IPCL and G E Shipping.
The revamped sensex will come into effect from November 16, BSE officials said.
As a result of these changes, the market capitalisation of the sensex will rise by Rs 7,000 crore to Rs 1,65,558 crore, as of September 30, 1998, 34.5 per cent of the BSE market capitalisation.
The infotech sector, which makes its maiden appearance in the sensex, will have a weightage of 4.33 per cent.
"The infotech sector has been outperforming the sensex for some time. We feel that the long-term growth prospects for this sector are healthy and the trend could stay on longer," Anand Rathi, BSE governing board and index committee member, said at a press conference yesterday.
In the revised sensex, Hindustan Lever Ltd has the highest weightage of 20.2 per cent as well as the largest market capitalisation of Rs 33,475 crore. ITC has the second highest weightage of 10.25 per cent (market capitalisation: Rs 16,964 crore), followed by MTNL with a weightage of 7.71 per cent (market capitalisation: Rs 12,758 crore).
BSE officials said they had conducted a detailed review of 150 scrips over the past year, considering factors like liquidity, market capitalisation, trading volumes and company/management track record.
Rathi ruled out frequent changes in the sensex composition. "The sensex must have a long-term life and should facilitate correlation. There will not be frequent changes in the sensex composition," he said.
On the four scrips that were excluded, Rathi said, "it is not a statement against these companies...the decision to exclude these stocks was based on what the market index required and whether the parameters were met." He pointed out that the IPCL and SAIL scrips had witnessed a slide in their prices and were relatively illiquid.
According to market players, while Infosys and NIIT were expected to gain entry into the sensex due to high trading interest, profitability and track record, the inclusion of Castrol and Novartis was aided by the strong liquidity at these counters.
The index committee also decided to conduct a quarterly review of all the BSE indices. The committee will lay down a criteria for selection of scrips and review of the sensex. All scrips in the revised sensex have been traded daily for the past two years. Further, all have a continuous dividend paying and profitability record for the past three years.
