Nifty 50 Reshuffle: What's Changing and Why it Matters? (2024)

• 11 March 2024

Have you ever noticed how stock market indices, such as the Nifty 50, undergo changes from time to time? Sometimes a company gets included, while other times it gets excluded. For instance, recently it was decided to include Shriram Finance Limited in the Nifty 50 and remove UPL from it.

Why does this happen, and what impact does it have on individual stocks, along with what does it mean for investors? Let’s find answers to these questions.

What’s Happening?

According to Mint, the National Stock Exchange (NSE) announced on February 28, 2024, that Shriram Finance Limited would be included in the Nifty 50 index, replacing UPL. This change would be effective from March 28, 2024, meaning UPL will no longer be part of the Nifty 50 index. Not only this but UPL has also been removed from the Nifty 100 index.

Additionally, companies like Jio Financial Services, Indian Railway Finance Corporation (IRFC), REC Limited, Power Finance Corporation, and Adani Power have also been included in the Nifty Next 50 index. On the other hand, companies like PI Industries, Procter & Gamble Hygiene and Health Care, Adani Wilmar, Muthoot Finance, and Shriram Finance have been removed from the Nifty Next 50 index.

Why are Companies Added to or Removed from Stock Exchange Indices?

Indices like Nifty 50 and Sensex represent the overall market sentiment. They track the performance of major companies across sectors and the decision to include a company in an index is based on whether it meets the criteria of that index, such as market capitalisation, liquidity, and financial performance. Conversely, if a company falls short of the defined parameters, the exchange decides to exclude it from the index.

What Impact Does It Have on Individual Stocks?

When a company is included in a major index like Nifty 50, it often leads to an increase in its stock price. This is because various funds, that track the index, have to invest in the shares of that company. Moreover, being included in Nifty 50 is considered a positive sign for the company, leading to increased investor interest and potential for more investments.

Recently, after the news of Shriram Finance being included in Nifty 50, there was a surge of over 4% in the price of Shriram Finance shares. On the other hand, news of UPL being removed from Nifty 50 led to a decline of more than 1% in its price.

How Beneficial is it to be Included in Nifty 50?

Changes in Nifty 50 can be significant for investors, especially those who invest in mutual funds or Nifty ETFs. Inclusion in Nifty 50 increases demand for a company’s shares, which may potentially lead to long-term value growth. However, it is important to remember that past performance does not guarantee future results. Investors should always make investment decisions based on thorough research of individual companies’ fundamentals and future prospects.

Changes in Nifty 50 reflect the performance of the Indian economy and various sectors. Investors should pay attention to index changes, but also conduct a deep analysis of companies’ fundamental factors and future prospects.

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer

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