HDFC delisting may pave the way for LTIMindtree to enter Nifty50 index

The delisting of country's largest mortgage lender Housing Development Finance Corporation (HDFC) shares on July 13 is likely to pave the way for LTIMindtree to enter the benchmark Nifty50 index.

The merger of HDFC with the largest private lender HDFC Bank will be effective from July 1, said HDFC chairman Deepak Parekh on Tuesday, while the shares of HDFC will get delisted effective July 13.

HDFC and HDFC Bank, both are heavyweights on the benchmark index Nifty50. While HDFC Bank has 8.73% weightage on the index, housing finance major HDFC has a weight of 5.88% on Nifty50.

Read here: HDFC - HDFC Bank merger to be effective July 1, says Deepak Parekh

After delisting of HDFC stock, LTIMindtree is a high-conviction replacement for the index, as per Nuvama Alternative & Quantitative Research.

On June 27, LTIMindtree share price ended 3.05% higher at ₹5,160.00 apiece, with a market capitalisation of ₹1,52,676.84 crore on the NSE.

After the merger between the two financial majors, LTIMindtree will become the 50th biggest company in India by market capitalization.

According to the preliminary calculations by Nuvama, LTIMindtree should see an inflow of $150 million to $160 million.

LTIMindtree is the country's fifth-largest IT services provider by market capitalisation and sixth-largest by revenue.

Also Read: HDFC twins merger: What does HDFC-HDFC Bank merger mean for depositors and borrowers?

As per NSE, the constituents for Nifty50 are selected from the universe of Nifty 100 based on freefloat market capitalisation and liquid companies having average impact cost of 0.50% or less for 90% of the observations for a basket size of ₹10 crore. 

Market impact cost is the best measure of the liquidity of a stock and reflects the costs faced when actually trading an index.

Moreover, the company should have a listing history of 6 months and the stock also should have derivative contracts available on NSE.

There may also be changes in the Nifty Bank index after the merger.

On Tuesday, the shares of HDFC Bank ended 1.39% higher at ₹1,658.25 apiece, while HDFC closed 1.33% higher at ₹2,756.60 apiece on the NSE.

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