The Nifty has traditionally undergone a shift to reflect the market in a more comprehensive way. The latest shift in the Nifty index will introduce insurance companies for the first time into the indices making them more reflective and also improve the quality of Nifty earnings.
Insurance makes an entry
The latest round of changes in the Nifty is likely to be all about insurance. It may be recollected that insurance companies were listed on the Indian bourses just about 3 years back. Today there are over six insurance companies that are listed and actively traded on the stock exchanges. Let us look at the major shifts first. The first shift is likely to be HDFC Life coming into the Nifty index in place of Vedanta. The exit of Vedanta was, anyways, a foregone conclusion. With Vedanta Resources PLC planning to delist its Indian subsidiary, the only thing left was the approval of majority of the shareholders. With nearly 70% of the shareholders approving the delisting the only option was for the exchanges to delist the stock. The other shift will be SBI Life replacing Zee Entertainment in the Nifty. Zee had been largely an underperformer in the market and had been in the news for the wrong reasons including the near default. SBI Life has emerged as one of the largest insurance players in India outside of LIC and these two players look best poised to play the bancassurance model effectively in the insurance space. What about flows?