DLF's position in Nifty index under question

Sebi’s three-year ban has put at risk DLF’s position in the benchmark NSE Nifty index.  Proxy advisory and corporate governance firm Institutional Investor Advisory Services (IiAS) has said the Sebi order on the real estate major has raised a question mark on whether DLF should continue as a frontline index stock.

At present, DLF is the only company representing the real estate sector in the 50-share Nifty index. Exchange-traded funds (ETFs) and other passive investment products tracking the Nifty index have to take exposure to all the components of the index. Nifty is the most-traded benchmark index for the Indian market.

“Being part of the CNX Nifty, DLF attracts several equity retail and institutional shareholders. Index funds will also be required to hold the stock in the almost the same measure as its weight in the index. But, with the recent Sebi order, markets must question whether it should remain a constituent of a principal index,” says IiAS.  Expulsion from the Nifty index could lead to further selling in the stock by passive funds.