Fashion retailer Trent shares jumps over 3% ahead of Nifty rejig

Shares of fashion retailer Trent rose 3.1 per cent to end at a new record high of Rs 6,999. The gains come ahead of half-yearly index rebalancing exercise of Nifty indices, where the Tata group firm is expected to replace pharma firm Divi’s Laboratories. The stock also got a boost after chairman Noel Tata said in a newspaper interview that the company has potential to grow 10-fold from the current level. Shares of Trent have already been on a tear this year, surging 2.4 times underpinned by strong financial performance.

Nifty inclusion could lead to passive buying to the tune of Rs 4,180 crore, predicts Nuvama Alternative & Quantitative. The brokerage also expects state-owned Bharat Electronics (BEL) to replace software firm LTI Mindtree in the Nifty 50 index. BEL could see inflows of Rs 3,710 crore. On the other hand, Divi’s Lab and LTI Mindtree could see outflows of Rs 2,200 crore and Rs 1,750 crore in an event they are removed from the widely-tracked Nifty 50 index which is tracked by passive funds with assets under management of nearly Rs 4 trillion.

 

Trent’s addition to Nifty will take the total count of Tata group stocks in the 50-share index to six. At present, Tata Consultancy Services (TCS), Tata Motors, Titan, Tata Steel, and Tata Consumer are part of Nifty. BEL’s addition will increase the PSU count to seven. Coal India, BPCL, SBI, Power Grid, ONGC, and NTPC are part of Nifty.

Inclusion in prominent indices like Nifty, Sensex, and MSCI Emerging Market Index is viewed as a short-term boon for stocks, triggering passive inflows. However, experts caution that this benefit often wears off in the medium term. The reason: indices tend to add stocks that have already experienced significant growth, leaving limited room for further upside.

During the previous rebalancing announced in February, NBFC firm Shriram Finance replaced agro chemicals firm UPL in the Nifty 50 index. The changes became effective from March 28. Since then, shares of Shriram Finance have gained 23 per cent, while UPL has gained 27 per cent.