Divi’s Lab, SBI Life Insurance to enter Nifty 50

Last updated: 24 Aug, 2020 | 01:10 pm

Divi’s Lab, SBI Life Insurance to enter Nifty 50

SBI Life Insurance Company and  Divi’s Lab will be included in the Nifty 50 Index from September 25th, 2020. 

Free-float and likely weightage

  • 'SBI Life Insurance currently has a free-float market capitalisation of ~Rs 33,580 crore, which is similar to BPCL that has a weight of 0.71% in Nifty 50 (as of July 31st).' Therefore, it is expected that SBI Life will have approximately 0.71% weightage in the Index.
  • 'Divi’s Lab currently has a free-float market capitalization of ~Rs 41,379 crore, which is similar to the market capitalization of Wipro, that has a weightage of about 0.90% in the Nifty 50 index (as of July 31st).' Therefore, it is expected that Divi’s Lab will have approximately 0.90% weightage in the Index.
  • Zee Entertainment and Bharti Infratel will be excluded from the Nifty 50 index from September 25th.

What are the likely inflows from passive funds?

  • There are passive funds in India and abroad that only track and invest in Nifty 50 stocks. These funds replicate a portfolio similar to nifty 50 and rebalance their holding as per changes in holdings of the Index.
  • The total AUM of Index funds and ETF’s that track Nifty 50 in India is approximately Rs 1 lakh crore. There are many foreign emerging market funds that also invest.
  • As per the expected weights and the average AUM of these passive funds, approximately ₹900 crore of buying will happen in Divi’s Lab and ₹710 crore will flow into SBI Life Insurance
  • The stock prices are likely to move upwards and downwards due to the buying and selling pressure. However, stock prices are influenced by many other factors as well.

 SBI Life, Divi’s Lab shares have gained over 2% since the announcement on Aug 21st. 

Consensus recommendation

Divi’s Lab: Hold

SBI Life Insurance: Hold

(Based on views of 31 analysts from external institutions)

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