From today the National Stock Exchange (NSE) will compute its benchmark Nifty, CNX 100 using the free-float market capitalisation methodology. The weightage will go up for some stocks like ICICI Bank, L&T, Infosys, HDFC, HDFC Bank. But some of the stocks which could get impacted are stocks like ONGC where the weight will come down from around 8.5% to nearly 3.17% that’s reduction of nearly 4.6% in ONGC.
Sector specific - Power, oil and gas, telecom these will be the sectors where we will be seeing reduction in weightage and it will be the banking pack which will gain the most because the weight will go up significantly from around 11.8% to 18.2%. But we need to breakdown the banking sector into the public sector banks and the private sector banks. The public sector banks weight will remain same from around 4.5% to the same around 4.5% but private banks – the weight will go up from 6.2% to 12.3% that is a addition of nearly 6%.
Hence dont be surprised if ONGC dont make a huge impact on market and Private sector banks dictate terms to the market.
1 comment:
The decision of changing the market cap based index calculation to free float index is a good one considering the objectives of having a stock Index in any country.
The main objective if we define is to capture the overall market picture that is to say an ideal index would be one whose movement would be highly correlated to all possible portfolios in the market.
SO to have a correct picture of the MARKET the shares which are traded in actual market should be taken into consideration and not those which include shares held by promoters, strat egic holders, government, etc.
Even though the change in process might hurt some stocks due to low weightage will give us the true picture and transparent results.
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