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MOSL: INDIA STRATEGY | Sensex reconstitution: Upgrade in FY19E EPS; Weight of Metals to increase 130bp to 2.6%

INDIA STRATEGY | Sensex reconstitution: Upgrade in FY19E EPS; Weight of Metals to increase 130bp to 2.6%; Healthcare to hit eight-year low

 

• The S&P BSE Sensex composition is all set for a reshuffle on Monday, June 18, 2018. Vedanta will replace Dr Reddy's Labs.
• In this report, we analyze how these changes will (i) impact the earnings for the benchmark, and (ii) alter the weights of various sectors.

 Sensex reconstitution: Metals' weight will double to 2.6% (+130bp)

• Vedanta will be included in the benchmark, with weight of 1.3%, taking Metals' weight to 2.6% (+130bp). With this inclusion, the Metals sector will have two stocks in the benchmark (Tata Steel having 1.3% weight).
• With the exit of Dr Reddy's Labs (weight: 0.8%), Healthcare stands to lose the most in terms of weight (-70bp to 1.7%). Earlier, in December 2017, Cipla and Lupin were excluded from the benchmark.
• Healthcare's weight will now be at an eight-year low, with the exclusion and also due to the significant underperformance of the sector over the last two years. Sun Pharma (weight: 1.7%) will be the only Healthcare stock in the benchmark index.
• Other losers include Private Banks (-20bp), Technology (-10bp), Consumer (10bp), and Autos (-10bp).
• The least impacted sectors would be Oil & Gas, NBFCs, Capital Goods, Utilities, PSU Banks, Telecom and Infrastructure.