NSE floats consultation on index components ahead of HDFC-HDFC bank merger

NSE on Tuesday sought market feedback on treatment of index components getting merged or demerged. The public consultation comes ahead of the proposed merger between financial sector behemoths HDFC Bank and HDFC. 

Currently, the entity getting merged is removed from the index and later the weightage of the merged entity is increased. To illustrate, HDFC Bank, which has 5.5 per cent weightage in the Nifty, will first be removed. As a result, its weightage will get distributed with all the remaining index components. 

Later, when the merger between HDFC and HDFC Bank is complete, the weightage of the merged entity once again will be increased. 

Analysts had pegged $1.5 billion worth of selling in HDFC on account of this. 

NSE is now proposing to simultaneously remove the entity that is merging and increase the weightage of the resultant entity. This will help avoid unnecessary churn.