MOSL: INDIA STRATEGY-Nifty reconstitution-Marginal FY19E EPS downgrade-Weight of Private Financials to increase

INDIA STRATEGY: Nifty reconstitution; Marginal FY19E EPS downgrade; Weight of Private Financials to increase; PSU Banks to hit new low

• NSE Nifty-50 composition is all set for a reshuffle on Friday, 29th September 2017. Bajaj Finance, HPCL and UPL will replace ACC, Bank of Baroda and Tata Power. Tata Motors, which carries Differential Voting Rights (DVR), will be excluded – it was an additional stock in the benchmark.
  
• In this report, we highlight how these changes will (i) impact the earnings for the benchmark and (ii) alter the weights of various sectors.
  
• Nifty-50 reconstitution: NBFC’s weight nearing double-digit
  
• Bajaj Finance will be included in the benchmark with 1% weight, taking NBFC’s weight to 9.5% (+90bp).
  
• HPCL will enter with 0.9% weight, helping Oil & Gas to cement its position in the benchmark. This is first time in the history of the benchmark when all three OMCs will be part of the index. UPL will enter the index with 0.8% weight.
  
• With the exit of Bank of Baroda (weight: 0.4%), PSU Banks’ weight will be at an all-time low of 2.5%. Other losers include Utilities (-40bp), Cement
  
• (-40bp), Automobile (-40bp) and Private Banks (-30bp).
  
• Least impacted sectors would be Technology, Consumer, Healthcare, Capital Goods, Metals, Telecom and Media.
  
• Post this reshuffle, BFSI will have an index weight of 35.8% (+30bp), almost equivalent to the combined weights of Oil, Technology and Auto.