Nestle rallies on Nifty inclusion hopes; Indiabulls Housing could make way

Shares of Nestle India, domestic arm of Swiss consumer goods giant, rose as much as 5 per cent on Wednesday on hopes of Nifty inclusion. Despite having market capitalisation of more than Rs 1 trillion, Nestle India is not part of the widely-followed Nifty 50 index as the company is not listed on the National Stock Exchange (NSE). However, a change in index inclusion criteria by NSE has opened the gates for Nestle India to make it to the index of India’s 50 blue chip companies that too as early as October.

“Nestlé India is likely to be included in the Nifty from the October series. The announcement for the same from the NSE is expected to be made sometime in the coming sessions,”said ICICI Direct in a note.

The brokerage said Nestle India could replace Indiabulls Housing Finance given its low free-float market capitalisation. Shares of Indiabulls Housing dropped over 6 per cent on Wednesday on fears of outflows from passive funds.  

ICICI Direct says Nestle India could have a weightage of near 1 per cent in Nifty index. If included Nestle India will join FMCG peers Hindustan Unilever, ITC and Britannia in the Nifty index. The move will lead to a higher weightage of FMCG stocks and help reduce that of financial stocks. Growing dominance of the financial sector in the Nifty index had recently drawn criticism, forcing exchanges to float consultation papers on whether there should be a cap on the sectoral weightage.

Under the revised framework, NSE has said it will also consider stocks that are not listed on its platform but are ‘permitted to trade’. Stock exchanges allow trading in stocks listed on rival exchanges under the so-called ‘permitted to trade’ category.

Currently, there over a dozen stocks, including Abbott India, Bayer Cropscience and Nestle India, which are not listed on NSE but trade in the permitted to trade segment.