Nifty reshuffle: Zomato and Jio Financial could edge out Britannia and BPCL in India's benchmark index

The Nifty 50’s much-anticipated reshuffle on 27 March could see two new-age companies debut at the expense of established players as well as trigger significant fund inflows and outflows, reshaping investor portfolios and sectoral representation within the benchmark index.

According to Nuvama Alternative & Quantitative Research, food delivery giant Zomato Ltd and Jio Financial Services Ltd are poised to replace state-owned Bharat Petroleum Corporation Ltd (BPCL) and packaged consumer goods company Britannia Industries Ltd on the Nifty 50. An official announcement is expected later this month.

Zomato made history on 23 December by becoming the first new-age company to be included in the elite BSE Sensex index, which comprises 30 stocks, while Jio Financial Services made it to the BSE Sensex 50.

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The reshuffle, based on free-float market capitalization, could also drive substantial passive fund inflows into Zomato and Jio Financial Services, estimated at $631 million and $320 million, respectively. Conversely, BPCL and Britannia’s exclusion may lead to estimated outflows of $201 million and $240 million, respectively.

“In our assessment, Hero MotoCorp narrowly holds its position, saved by just ₹1 crore higher free-float market capitalization," Abhilash Pagaria, head of Nuvama, said in a recent report. “The competition for spots has been intense, with both Britannia and Hero MotoCorp giving each other a tough fight to maintain their seats in the Nifty 50."

"The potential reshuffle will mark a significant shift in the index. Zomato, having bounced back from its lows, is one of the strongest outperformers and represents a new-age business model that is likely to attract fresh fund flows," said Kranthi Bathini, director of equity strategy at Mumbai-based WealthMills Securities.

“On the other hand, Jio Financial, backed by the strong pedigree of Reliance Industries, brings the credibility and stability of a well-established group. With their emerging ventures in asset management, stock broking, and fintech, including the Jio Small Finance Bank, they are poised to make an impact," Bathini added. 

“These innovative business models and strategies will undoubtedly enhance the value of the Nifty 50."

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Over tha past year, Zomato has delivered returns of about 66%, significantly outperforming the Nifty 50's nearly 9% gain. Its food-delivery business revenue increased nearly 22% in the December quarter, while revenue from Blinkit, the market leader in India’s quick commerce space, more than doubled. However, Zomato reported a 57.3% year-on-year decline in net profit to ₹59 crore.

Jio Financial Services, a non-banking financial company, reported a 0.3% on-year increase in net profit to ₹295 crore for the December quarter, while income rose to ₹449 crore from ₹414 crore. Its assets under management increased significantly to ₹4,199 crore in October-December from ₹1,206 crore in the preceding September quarter. However, Jio Financial Services’ returns declined 13% over the past year, underperforming the Nifty.

Britannia and BPCL, too, have underperformed the Nifty 50, declining 3.7% and 9%, respectively, over the past year.

BPCL, Britannia, CG Power and Industrial Solutions Ltd, Hyundai Motor India Ltd, Swiggy Ltd, Bajaj Housing Finance Ltd, and NTPC Green Energy Ltd are expected to be included in the Nifty Next 50 index, according to the Nuvama report. 

Stocks likely to exit the Nifty Next 50 index are Zomato, Jio Financial Services, Bharat Heavy Electricals Ltd, NHPC Ltd, Indian Railway Catering and Tourism Corporation (IRCTC), Union Bank Ltd, and Adani Total Gas Ltd, it added.

While these projections are based on prevailing market trends, there are inherent risks that could alter the outcome. These include potential changes to NSE Indices’ methodology and fluctuations in the free-float factors of the stocks concerned.