Which stock could replace HDFC in Nifty rejig?

On which stock can replace HDFC Ltd (given its merger with HDFC Bank, Edelweiss said that “it is quite early to pinpoint a stock that holds the strongest chance to replace HDFC Ltd on its merger ex-date.” The brokerage house expects the merger’s completion by Q1 FY24 and a few stocks currently on our radar are Pidilite (PIDI), LTI Mindtree (LTIM), Ambuja Cement (ACEM) and Tata Power (TPWR).

In April this year, the country’s largest housing finance company HDFC Ltd announced that it will merge with HDFC Bank. Reports suggest that the merger with its home loan major HDFC will take another 8-10 months.

At Nuvama Alternative & Quantitative Research, Edelweiss has carried out a pre-emptive analysis of the Semi-Annual Index (SAIR) March 2023 rejig for Nifty indices. The Index provider will officially announce the list in the second half of February 2023. The analysis entailed expected member reconstitution in all the passive and broader indices offered by NSE (Nifty) Indices Ltd.

The most important criteria for a Nifty 50 inclusion is that the stock should compulsorily be part of the Derivatives segment. For instance, average free float market cap of Avenue Supermarts (DMART), Adani Green Energy (ADANIGR) and Adani Transmission (ADANIT) is significantly higher than most of the existing Nifty 50 constituents, but the stock has not been included in the index for the past few reviews as they are not a part of the F&O segment. If any of the above stock gets included in derivatives by the announcement date, then it would make it to Nifty 50.