MOSL: INDIA STRATEGY | Sensex reconstitution-Marginal FY19E EPS upgrade-Weight of BFSI to increase 330bp to 40%

​INDIA STRATEGY | Sensex reconstitution; Marginal FY19E EPS upgrade; Weight of BFSI to increase 330bp to 40%; Healthcare to hit seven-year low

• The S&P BSE Sensex composition is all set for a reshuffle on Monday, 18 December 2017. IndusInd Bank and Yes Bank will replace Cipla and Lupin in the index.
  

In this report, we will analyze how these changes will (i) impact the earnings for the benchmark and (ii) alter the weights of various sectors.

• Sensex reconstitution: BFSI will have 40% weight (+330bp)
  
• IndusInd Bank and Yes Bank will be included in the benchmark, with weights of 2.6% and 1.7%, respectively, taking Private Banks’ weight to 28.1% (+360bp).
  
• BFSI will have a weight of 40.1% (+330bp) post the reshuffle, which will be more than the combined weights of Technology, Consumer and Auto.
  
• BFSI and Technology (weight: 51.4%; nine companies) will now account for more than half of the index.
  
• With the exit of Cipla (weight: 0.9%) and Lupin (weight: 0.6%), Healthcare stands to lose the most in terms of weight (-170bp to 2.6%). Other losers include Technology (-30bp), Consumer (-30bp), Auto (-30bp), Oil & Gas (-30bp) and NBFCs (-20bp).
  
• Least impacted sectors would be Capital Goods, Utilities, PSU Banks, Telecom, Metals and Infrastructure.
  

Of the top-10 stocks to be most impacted, four are from Financials

Aggregate weight of the existing 29 Sensex stocks will decline by 270bp.

• Top-10 stocks to be most impacted (in terms of weight) by the reshuffle: HDFC Bank (-32bp), Reliance Inds (-26bp), HDFC (-24bp), ITC (-19bp), Infosys (-18bp), ICICI Bank (-17bp), L&T (-13bp), TCS (-11bp), Maruti (-11bp) and SBI (-10bp).
  
• Top-10 stocks currently contribute 65.7% of Sensex. Post reshuffle, this is likely to come down to 63.9% (-180bp).