BSE, Wipro Shares In Focus As Nifty 50 Rejig Takes Effect Today; Check Inflows, Outflows

BSE shares fell around 4% on Wednesday as the stock exchange operator made its debut in the Nifty 50, replacing Wipro in the benchmark index. Wipro shares were also in focus as the IT major exited the index. The Nifty 50 rejig took effect on September 30, with passive fund flows expected to drive buying in BSE and selling in Wipro.

The change is effective from September 30. BSE's inclusion is expected to bring buying from passive funds and exchange-traded funds that track the Nifty 50, while Wipro's removal is likely to result in selling by such funds as they realign their portfolios.

The index change comes after a sharp run-up in BSE shares this year. The stock has gained significantly as trading activity on the exchange and its market value have risen, helping it qualify for inclusion in the country's benchmark equity index.

BSE Nifty 50 Inclusion: How Much Inflow Is Expected?

BSE could see passive inflows of about $657 million following its entry into the Nifty 50, according to estimates from Axis Capital. This would translate into buying of around 15.7 million BSE shares by passive funds tracking the index.

The expected buying is linked to BSE's new position in the Nifty 50. Index funds and exchange-traded funds that track the benchmark generally need to hold the constituents in line with their respective index weights. As a result, changes to the index can lead to sizeable trades around the effective date.

NSE Indices had selected BSE for inclusion after the stock exchange operator met the eligibility criteria for the Nifty 50. BSE's six-month average free-float market capitalisation was around ₹1.41 lakh crore, significantly higher than Wipro's ₹55,930 crore, according to the index review data.

The inclusion also reflects the sharp increase in BSE's market capitalisation over the past year. The exchange operator has benefited from higher activity across the equity and derivatives segments, while its shares have also seen strong investor interest.

BSE's entry means the exchange operator will now be part of the 50-stock benchmark followed closely by domestic and global institutional investors.

Wipro Nifty 50 Exit: What Are The Expected Outflows?

Wipro, meanwhile, is expected to see passive outflows of around $225 million following its exit from the Nifty 50, according to Axis Capital. The estimate represents selling of around 114.2 million Wipro shares.

Wipro's exclusion follows a prolonged period of underperformance in the IT sector. The stock has fallen sharply this year and was the smallest eligible constituent by free-float market capitalisation in the Nifty 50 review, according to the index data.

Following its exit from the Nifty 50, Wipro will move to the Nifty Next 50 index.

The selling linked to the reshuffle does not necessarily represent a change in the fundamental view of the company. The expected outflow is primarily a result of index-tracking funds adjusting their holdings after the change becomes effective.

For investors tracking the two stocks, the September 30 session is therefore important because a portion of the expected institutional buying and selling could be concentrated around the index-rebalancing window.

BSE Vs Wipro: What Changes After Nifty 50 Rejig?

The reshuffle changes the composition of the Nifty 50, with BSE taking the place of Wipro. BSE's inclusion gives the exchange operator representation in the country's benchmark index for the first time, while Wipro's exit takes the stock into the Nifty Next 50.

The index change is separate from the underlying businesses of the two companies. BSE's inclusion does not by itself change its earnings outlook, while Wipro's removal does not alter its business operations. The immediate market impact is linked mainly to portfolio adjustments by funds that track the Nifty 50.

Apart from the estimated passive flows, investors will also track how both stocks trade once the index adjustment is completed and whether the additional buying or selling affects their near-term price movement.

Also Read - Transport Corporation Approves ₹150 Crore Share Buyback