Thank you for throwing us out of Nifty50; 3 stocks rise up to 164% since their exit

NEW DELHI: Every company wants to be a part of the elite Nifty50 index, which is tracked by analysts across the globe. But what happens when a stock is excluded from this Club Elite?

History suggests stocks excluded from the Nifty50 index tend to perform better than those included. Surprised?

Let’s take the last reshuffle. In February last year, NSE announced dropping of Cairn India, Punjab National Bank and Vedanta from the Nifty 50 index with effect from April 1.

NSE replaced these stocks in the index with Aurobindo Pharma, Bharti Infratel, Eicher Motors and Tata Motors (DVR).

“Whenever a stock is included in the index, it underperforms and when it is pushed out, it outperforms,” Jimeet Modi, CEO, SAMCO Securities, told ETMarkets.com.

“Since the last reshuffle, all three stocks that were thrown out of the Nifty50 index – Cairn India, PNB and Vedanta – have risen between 50 per cent and 100 per cent,” he said.

A quick performance analysis of these stocks showed shares of Cairn India, PNB and Vedanta rose up to 164 per cent since their exclusion from the index, while Eicher Motors, Tata Motors DVR rose up to 18 per cent ever since their inclusion.

Among the newly included, Bharti Infratel has slipped 8 per cent since then and Aurobindo Pharma 4 per cent.



The Nifty50 index, which comprises 50 companies from across sectors, goes through periodic reshuffle based on pre-defined criteria in their semi-annual index review.

BHEL and Idea Cellular are the two stocks likely to get excluded from the Nifty50 index this time around. Some analysts say IOC and UPL have emerged as potential candidates to replace the two stocks in the Club Elite, Edelweiss Securities said in a report.

“IOC is better placed to do better amid expectation of a reshuffle of the index. When that happens, the company would be better placed to become a part of the index,” said Pankaj Pandey, HoR, ICICIdirect.com.

For inclusion in the index, a stock is required to have traded at an average impact cost of 0.50 per cent or less in the six months for 90 per cent of the observations for a basket size of Rs 2 crore.

Impact cost is the cost of executing a transaction in a stock in proportion to the weightage of its free float market capitalisation against the free-float market capitalisation of the index at any point of time.

According to NSE, a replacement happens “when a better candidate emerges in the replacement pool, which can replace an index stock, i.e. the stock with the highest free-float market capitalisation in the replacement pool has at least twice the free-float market capitalisation of the index stock with the lowest free-float market capitalisation.”