Among oldest Sensex stocks, Tata Motors drifts towards exit again

The stock is likely to be replaced by InterGlobe Aviation (IndiGo), which is currently the highest-ranked non-constituent by market value

Tata Motors, one of the Sensex’s original constituents, is at risk of losing its place in the 30-share benchmark next month, following a division in market capitalisation (mcap) after the demerger of its commercial vehicles business in October. 

InterGlobe Aviation, the operator of the country’s largest airline IndiGo, is expected to take Tata Motors’ spot. It has emerged as the highest-ranked non-constituent by mcap. 

Following the split, Tata Motors’ commercial vehicles business is valued at ₹1.19 trillion, while Tata Motors Passenger Vehicles commands a mcap of ₹1.37 trillion. IndiGo, by contrast, sits well above both at ₹2.27 trillion.  The December review is expected to be announced later this month, with index changes taking effect from the close of trade on December 19.

 

This wouldn’t be Tata Motors’ first exit from the Sensex. It was dropped in December 2019 amid poor run in the equity markets against the backdrop of uncertain business visibility and high debt, only to rejoin the index in December 2022. 

According to an analysis by Brian Freitas of Periscope Analytics, published on Smartkarma, Tata Motors could face passive outflows of about ₹2,232 crore if it is removed from the index, while IndiGo may draw inflows of roughly ₹3,157 crore. Freitas added that Grasim Industries has an outside chance of inclusion should the index committee opt to bolster its under-represented commodities exposure. If added, Grasim would attract passive inflows of ₹2,526 crore.

 

The Sensex -- launched on January 1, 1986, with a base value of 100 back-dated to 1979 -- remains a bellwether for the Indian economy and equity markets. Of the original 30 stocks, only three -- Reliance Industries, Hindustan Unilever and ITC -- have remained uninterrupted members. Other founding names, including Larsen & Toubro, Tata Steel, Tata Motors and Mahindra & Mahindra, continue to feature today, though each has been dropped and reintroduced at various points. If removed in the upcoming review, Tata Motors would follow Nestlé, another original constituent dropped in June’s rebalancing.

 

Among current members, Infosys and State Bank of India stand out as the longest-serving additions, though both joined after the index’s inception.

 

Tata Motors PV shares drop 4.8%

 

Shares of Tata Motors Passenger Vehicles (PV) fell as much as 7.3 per cent in intraday trade on Monday amid a decline in volumes at Jaguar Land Rover (JLR), with the company also trimming its margin forecast for the luxury carmaker.

 

Tata Motors PV ended at ₹372.7, down 4.83 per cent from its previous close. The counter was listed separately last week after being spun off from Tata Motors, which now houses the commercial vehicles division. Tata Motors PV includes the passenger vehicles portfolio -- electric vehicles and the JLR franchise, which generates the bulk of its profits.

 

A cyberattack in early September forced a five-week production halt at JLR and resulted in a one-off charge of $228.5 million in the second quarter.

 

In a note, Jefferies warned that JLR faces multiple headwinds, including fiercer competition and consumption tax pressures in China, elevated discounting and the industry’s ongoing shift towards electric vehicles. 

Oldest components of Sensex

• Uninterruped: Reliance Industries, Hindustan Unilever, and ITC 
• Current constituents but excluded at some point: Larsen & Toubro, Tata Steel, Tata Motors, and Mahindra & Mahindra

Sources: Smartkarma, BSE