After proposing consultation paper for treatment of demerger in Nifty equity indices:
NSE Indices, with an intention of reducing churn in index constituents resulting from corporate action involving demergers, issued a circular revising the methodology of Nifty equity indices for handling corporate actions involving demerger from April 30, 2023:
If Special Pre-Open session (SPOS) is conducted by Exchange:
The Demerged company shall be retained in the index.
After EOD on 3rd day of listing, the newly listed entity shall be removed from the index.
The spun off business/ entity shall be included in the index at constant price*
- *= difference between the demerged company’s closing price on T-1 day wherein T is Ex-Demerger
date and price derived during Special Pre-Open session (SPOS) on the Ex-Demerger date.
In case, during the first 2 days of these 3 days, if the spun off business/ entity hits the price band
on both days, then the exclusion date shall be deferred by another 3 days. After observing two
consecutive days of the spun off business/ entity not hitting the price band, such spun off
business/entity shall be removed after the third trading day of such observation.
If on such 3rd day spun off business/ entity again hits the price band, exclusion of such stock shall
not be deferred anymore.
If Special Pre-Open session is not conducted by Exchange
In case of indices with fixed number of companies : the Demerged company shall be removed from the index at the beginning of T-1 day (close of Ex. – 2) where T day = Ex. date for demerger of stock by making a suitable replacement.
In case of indices with variable number of companies : No replacement (inclusion) will be made.