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MOSL: Morning India (16/June/17)-1. India Strategy (Sensex reconstitution, EPS downgrade of 1.5%)-2. Bharti Infratel 3. Cummins India

​MOrning India (16/June/17): 1. India Strategy (Sensex reconstitution, EPS downgrade of 1.5%); 2. Bharti Infratel (Healthy tenancy outlook to support growth); 3. Cummins India (Domestic business witnessing strong demand revival)

Today’s top research theme

Sensex reconstitution, EPS downgrade of 1.5%; Weight of Financials to rise 250bp, Tech weight to hit near-decade low

The S&P BSE Sensex composition is all set for a reshuffle on Monday, 19 June 2017. Key observations:

• ​KMB will be included in the benchmark with 3.5% weight, and thus, will be among the top-10 stocks by weight. Tata Motors DVR will enter with 0.5% weight, helping maintain the weight of Auto sector in the benchmark.
  
• With the exit of GAIL (weight: 0.8%), Oil & Gas stands to lose the most in terms of weight (-110bp to 9%). Other losers include Consumer (-40bp), Technology (-40bp), NBFCs (-30bp), Healthcare (-20bp) and Capital Goods (-20bp).
  
• BFSI will have weight of 36.1% (+250bp) post the reshuffle, which will be almost equivalent to the combined weights of Consumer, IT and Auto.
  
• Aggregate weight of the existing 29 Sensex stocks will decline by 320bp.
  
• Sensex EPS for FY18/FY19 will see a downgrade of 1.5%/1.4%, primarily due to a higher increase in free float market cap of 2.7%, compared to a rise of 1.1%/1.3% in free float PAT for FY18/FY19.