It's Never the Same again. The Weightage given to Various shares on the NSE (TOP 50 Shares) Index seems to have changed once for all.
On 24th March 2009, the National Stock Exchange (NSE) after trading, said it is switching to a free float market capitalisation methodology effective from 26 June 2009 for calculating the value of its benchmark indices. Atleast in this step, NSE has followed BSE. Now Both Indices in India will be based on Free Float method.
This means that the weightages of companies in the index will be decided according to the floating stock (free float) of the company, and not by market capitalisation (full float) which is used currently.
Therefore the weightage of a stock in the Nifty will be proportional to the public shareholding (non-promoter holding) in that company.
Free float method is favoured internationally as it takes into account only the equity holdings that are available for trading. The promoters' holding generally doesn't come for trading in the open market and, hence, that part of market capitalisation is not available for trading. Therefore it should not get the weightages for deciding the levels of indices.
Gainers & Losers: See Attached pages
Our View:
Free float method is favoured internationally as it takes into account only the equity holdings that are available for trading. The promoters' holding generally doesn't come for trading in the open market and, hence, that part of market capitalisation is not available for trading. Therefore it should not get the weightages for deciding the levels of indices.
Gainers & Losers: See Attached pages
Our View:
- Out of 50, 24 stocks will be gaining weight while rest would be losing its weight
- Weightage for financial will go up while Oil and Gas & Power will see a dip in weightages.
- We recommend investors to switch from the stocks losing weight to the stocks commanding higher weights.
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