Inflows in Tata Motors stock may surge as it replace Dr Reddy's in Sensex

Change effective from Dec 19, but adjustment will take place on Dec 16. After DRL's deletion, Sun Pharma will be the only healthcare stock in the index

Tata Motors will replace Dr Reddy's Laboratories in the 30-share Sensex. The move could lead to buying of $150 million in Tata Motors by passive funds tracking the Sensex. On the other hand, Dr Reddy’s will see outflows of $113 million, as per IIFL Alternative Research.

The change will become effective from December 19. However, the adjustment will take place on December 16. After Dr Reddy’s deletion, Sun Pharma will be the only healthcare stock in the Sensex. The healthcare sector weightage in the Sensex is less relative to the sector’s weight in the overall market.

Exchange traded funds (ETFs) and index funds with an estimated asset base of Rs 10,000 track the Sensex. Among the large ones are SBI Sensex ETF and UTI Sensex ETF.

Asia Index, index providing arm of BSE, has also announced a few changes to two other indices. Adani Power and Indian Hotels will replace Adani Total Gas and Hindustan Petroleum Corp (HPCL) in the BSE 100 index and the Sensex Next 50 index.

Interestingly, a few Adani group stocks too were in contention to get included in the Sensex. These include Adani Transmission, Adani Green Energy and Adani Total Gas. However, as they are not members of the futures and options (F&O) segment, they missed out. Asia Index only recently tweaked the eligibility criteria to allow only F&O to get part of the index. 

Tata Motors' inclusion in the Sensex was also expected to result in the inclusion of Tata Motors DVR in the index. However, since the DVR too is not part of F&O, it wasn't included, said an analyst.