With the HDFC-HDFC Bank merger becoming effective on July 1, the country’s largest private sector bank is set to replace Reliance Industries as the bluechip with the heaviest weightage in the benchmark NSE Nifty 50 and BSE Sensex.
With effect from 13 July, when HDFC shares will be delisted from the key index, the weightage of HDFC Bank will increase to 14.43 per cent. Currently, Reliance controls 10.9 per cent of Nifty which will get reduced by 10 basis points (bps) to 10.8 per cent.
In the Sensex, RIL has a weighting of around 12 per cent. HDFC Bank and HDFC have weights of 8.8 per cent and 6 per cent in the Nifty and 9.9 per cent and 6.8 per cent in the Sensex, respectively.
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Unlike Reliance Industries, HDFC Bank doesn’t have a promoter, so the free float of the banking major will be the highest among all listed stocks. The National Stock Exchange (NSE) uses the free float market capitalisation method to calculate the weightage, due to which the stocks with a higher free float also get a higher weightage in the indices.
In the Nifty Bank index, HDFC Bank’s weightage will rise from 26.9 per cent to 29.1 per cent, leading to inflows of nearly $70 million from passive funds, according to Nuvama. ICICI Bank, the second largest lender by weightage, will see its weight decline by 1.1 percentage points to 23.3 per cent. State Bank of India, Axis Bank, and Kotak Mahindra Bank would also face weight reductions in the banking index.
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As per pro forma method, the merger entity will have a weighting of 16.7 per cent and 14.8 per cent in the Sensex and Nifty, respectively.
However, the market capitalisation of the merged HDFC Bank will be around Rs 14.7 trillion, which is below Reliance’s Rs 17.3 trillion market cap. HDFC Bank will surpass Tata Consultancy Services (TCS), currently valued at Rs 12.1 trillion.
Apart from Reliance Industries, ICICI Bank, Infosys, ITC, and TCS will also see a reduction in weightage in the Nifty 50 index.
