I am wondering why NSE is showing too much Love towards BOSCH. It is very much illiquid stock in equity and FnO. In options it is nil transactions.
Despite this low Volume it is included in FnO as well as Nifty Index. There are hundreds of stocks with better Volumes and Balance sheet without debt.
It seems some thing fishy about it’s inclusion in Index.
Also see Today’s Chart of BOSCH last minute. 30/08/2017.
Hmm the stock is illiquid but the weightage also is minimal 0.6% and it represents a different sector too
@harshendrasingh it is in Automotive sector. MRF is better than BOSCH. Exide and Amarajabat also have better Volumes and different product.
Scrip Name - Market Cap(₹ Cr.)
BOSCH - 66374.52
MRF - 26677.11
Amara Raja - 13053.49
Exide - 16638.75
So based on market cap BOSCH is the largest in the industry. Hence the inclusion
@harshendrasingh agree with you. Thanks. NSE should also look at Liquidity also as criteria.
I guess there is a formula that NSE uses for NIFTY stocks, that’s why if you notice, NIFTY 50 stocks keep changing.
Criteria for Selection of Constituent Stocks
Liquidity (Impact Cost)
For inclusion in the index, the security should have traded at an average impact cost of 0.50% or less during the last six months for 90% of the observations for a basket size of Rs. 2 Crores.
Impact cost is cost of executing a transaction in a security in proportion to the weightage of its free float market capitalisation as against the index free float market capitalisation at any point of time. This is the percentage mark- up suffered while buying / selling the desired quantity of a security compared to its ideal price (best buy + best sell) / 2
Others
a) A company which comes out with an IPO will be eligible for inclusion in the index, if it fulfils the normal eligibility criteria for the index like impact cost, market capitalisation and floating stock, for a 3 month period instead of a 6 month period.
b) The constituents should be available for trading in the derivatives segment (Stock Futures & Options market) on NSE.
c) Replacement of Stock from the Index:
A stock may be replaced from an index for the following reasons:
Compulsory changes like corporate actions, delisting etc. In such a scenario, the stock having largest free float market capitalization and satisfying other requirements related to liquidity, turnover and free float will be considered for inclusion.
When a better candidate is available in the replacement pool, which can replace the index stock i.e. the stock with the highest free float market capitalization in the replacement pool has at least twice the free float market capitalization of the index stock with the lowest free float market capitalization.
With respect to (2) above, a maximum of 10% of the index size (number of stocks in the index) may be changed in a calendar year. Changes carried out for (2) above are irrespective of changes, if any, carried out for (1) above.
From June 26, 2009, NIFTY 50 is computed using Free Float Market Capitalisation weighted method, wherein the level of index reflects the free float market capitalisation of all stocks in Index