Wipro, Tata Steel in contention to dislodge ONGC from BSE Sensex

Wipro or Tata Steel are likely to dislodge state-owned Oil and Natural Gas Corporation (ONGC) in the benchmark Sensex, as per an analysis by done by Brian Freitas, an independent analyst publishing on Smartkarma.

The 30-share bluechip index is rebalanced on a semi-annual basis with next rejig slated for June 18.  However, the changes to the index are announced a month in advance.

“We see Oil & Natural Gas Corp (ONGC IN) as a high probability deletion, while Wipro Ltd (WPRO IN) holds the edge over Tata Steel Ltd (TATA IN) as an index inclusion,” Freitas wrote in a note.

Six-month average free-float market capitalisation is one of the key parameters to determine addition or deletion of stocks.

Wipro’s average free float mcap stood at Rs 60,719 crore, while that of Tata Steel was Rs 48,287 crore.

HDFC Standard Life Insurance’s free-float mcap is more than that of Tata Steel at Rs 53,000 crore. But given the high weightage of financial stocks in Sensex, the stock may not make the cut.

Meanwhile, ONGC has the lowest average free-float mcap for the past six months at Rs 34,894 crore followed by Bajaj Auto (Rs 46,215 crore) and NTPC (Rs 48,220 crore).

The changes to Sensex impact exchange traded funds (ETFs) tracking the index. According to Smartkarma ETFs with assets worth nearly $7.9 billion are indexed to the Sensex. The largest being the SBI ETF Sensex with assets worth $5.6 billion. The largest overseas ETF tracking the Sensex is the iShares ETF listed in Hong Kong.

In December, Dr Reddy's had replaced Tata Steel in the index. However, shares of the steel maker have rallied more than 50 per cent which has “put it back into contention for index entry,” says Freitas.