HDFC Life to replace Vedanta in Nifty 50

HDFC Life to replace Vedanta in Nifty 50

Last updated: 06 Jul, 2020 | 06:02 pm

HDFC Life to replace Vedanta in Nifty 50

HDFC Life Insurance Company Limited will be included in the Nifty 50 Index and Vedanta Limited will be excluded out of it on 31st July 2020. 

Vedanta currently has a free-float market share of ~Rs. 19,000 crore and has a 0.45% weight in the Nifty 50 Index. HDFC Life has a free-float market share of ~Rs. 29,000 crore which is similar to Coal India that has a weight of 0.64% in Nifty 50. Therefore, it is expected that HDFC Life will have approximately 0.65% weightage in the Index. 

What does this mean for you?

  • 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. 91,500 crore (As of 31st May 2020). There are many foreign emerging market funds that also invest.
  • As per the expected weights and the average AUM of these passive funds, approximately Rs. 600 crore of buying will happen in HDFC life and Rs. 400 crore of selling in Vedanta due to rebalancing of these portfolios just from the Indian funds.
  • 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.

 HDFC life has gained over 6% since its announcement of addition in Nifty 50 whereas Vedanta has gained 1%. Our VGQM stock analysis model has a BUY rating on HDFC Life Insurance Company and a HOLD rating on Vedanta.

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