The National Stock Exchange (NSE) has decided to pre-pone YES Bank's exclusion from NSE indices to this Thursday, in light of the recent reconstruction scheme for the bank, which has also put certain restrictions on trading of the bank's shares.
NSE in a note said, "...in light of recent developments relating to YES Bank and the gazette notification dated March 13, 2020 on ‘Yes Bank Limited Reconstruction Scheme, 2020’, subsequent to above announcements on index rebalancing, the index maintenance sub-committee has decided to accelerate removal of YES Bank from NIFTY 50 and NIFTY Bank and also remove it from all NIFTY equity indices w.e.f. Thursday, March 19, 2020."
Earlier, the exclusion was to be effective from March 27.
According to market participants, excluding stock earlier than slated date will help to prevent fresh flows from Nifty and Bank Nifty-linked mutual funds (MFs), getting stuck due to lock-in of YES Bank's shares.
Government in a notification on Friday said new or existing shareholders will not be able to sell more than 25 per cent of holdings in YES Bank for a period of three years.
The 75 per cent three-year lock-in on YES Bank has prompted MFs to seek direction from the Securities and Exchange Board of India (Sebi), as exclusion of YES Bank from indices will force them to exit the YES Bank. However, the lock-in will block selling of the equity shares.
As many as 50 index and exchange traded funds (ETFs) are exposed to YES Bank as of February 29.
According to data from Rupeevest, MFs' exposure to YES Bank stands at Rs 492 crore. Of this, 62 per cent is held in various index funds and ETFs.
Apart from MFs, other investor categories also have sizeable exposure to YES Bank shares. At current market prices, value of overall non-promoter funds (i.e. public shareholders) in YES Bank stands at Rs 8,673 core. Of this, 75 per cent lock-in would amount to Rs 6,505 crore. For retail investors, the 75 per cent lock-in would amount to Rs 3,098 crore at current market price. For foreign institutional investors (FIIs), this would amount to Rs 1,076 crore.