Sensex Rejig: Which stock may enter and which could exit 30-share index

Sensex Rejig: The benchmark BSE Sensex is likely to undergo a reshuffle later this month. According to Zee Business research, the announcement related to the Sensex rejig could be made on May 22, while the changes are expected to become effective from June 22.

Among the key developments, Trent is seen as a likely candidate for exclusion from the benchmark index after a recent correction in its stock price impacted its free-float market capitalization. On the other hand, Shriram Finance and Hindalco Industries have emerged as the leading contenders for inclusion in the Sensex.

Why Trent may exit the Sensex

According to Zee Business research, the recent weakness in Trent shares has reduced the company’s free-float market capitalisation, which is one of the key parameters used in index selection. The stock has seen pressure in recent weeks after a strong rally earlier, leading to a decline in its ranking among large-cap companies.

Free-float market capitalisation refers to the market value of shares available for public trading and is a major factor considered by index providers while deciding index composition.

The possible exclusion of Trent comes at a time when investors are closely monitoring changes in benchmark indices, as such moves often lead to significant passive inflows and outflows from exchange-traded funds (ETFs) and index-linked mutual funds.

Hindalco may have an edge despite Shriram Finance leading in m-cap

While Shriram Finance currently appears to be ahead in terms of free-float market capitalisation, Zee Business research suggests that Hindalco may still have a higher probability of entering the Sensex.

This is mainly because the index committee may prefer broader sectoral representation while deciding the final composition of the benchmark index. Hindalco’s inclusion would strengthen the metals and commodities representation in the Sensex, which could work in its favour.

As a result, market experts believe Hindalco may get preference despite Shriram Finance remaining one of the top contenders based on market capitalization metrics.

Estimated inflows and outflows

Any change in the Sensex composition usually results in buying and selling activity from passive funds that track the index. Stocks entering the benchmark typically witness inflows, while excluded stocks may face outflows.

According to Zee Business research, Trent could witness estimated outflows of around Rs 2,490 crore if it is removed from the Sensex.

Meanwhile, Shriram Finance could attract estimated inflows of nearly Rs 4,300 crore in case of inclusion. Hindalco may also see passive inflows of around Rs 3,540 crore if it replaces Trent in the benchmark pack.

These flows are based on estimates linked to passive fund adjustments and ETF allocations.

Official announcement expected on May 22

The final decision on the Sensex reshuffle is expected to be announced on May 22. The revised index composition would likely come into effect from June 22.