Will Nifty 50 index have 51 companies?

[Meher_Smaran]

Earlier, NSE used event-based index reconstitution for mergers/demergers, where once shareholders approval is received, it is considered as a trigger to initiate replacement of such stocks in the index and exclusion of stocks going through merger/demerger is done much ahead of ex-date.

This rule changed from April 30, 2023 and the exchange decided to use a Special pre-open session (SPOS) to determine index reconstruction.

You can check the below mentioned post to read the summary of that circular:

Revision in methodology for handling corporate actions involving demerger

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 li…

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What happens to Nifty and Reliance Industries after the demerger?

On 20th July (record date), a Pre-open Call Auction Session will be conducted for Reliance in the Capital Market segment on July 20, 2023, from 9 AM to 10 AM to determine the opening price of Reliance.

So, what happens in the special pre-open session?

Let’s assume Reliance Industries closed at 3000 on 19th July,

On the next day, at the end of the Pre-open session, Reliance industries closes at 2800. Then, the difference (3000-2800) = 200 will be the price of Jio Financial Services which will continue to remain in the Index at that constant price till the shares are re-listed.

Once shares of Jio Financial Services are relisted, the shares will be excluded from the indices at end-of-day on 3rd day after relisting.

This is subject to certain price conditions:

• In case, during the first 2 days of these 3 days, if Jio Financial Services hits the price band on both days, then the exclusion date will be extended by another 3 days. After two consecutive days of the spun off business/ entity (Jio Financial Services here) not hitting the price band, Jio Financial Services will be removed after the third trading day of such observation.

Update: As JFS hit the price band in the first two days, The removal of JFS from nifty is postponed to 29th August from tomorrow

If on the 3rd day of extended period Jio Financial Services again hits the price band, exclusion of the stock from the index will not be extended further.

So, basically, Reliance Industries (along with constant price of Jio Financial Services will remain in the index till Jio Financial Services is relisted after which Jio Financial Services will get delisted after 3 days)

To know more about Reliance demerger, Check the below post out:

Everything you need to know about demerger of Reliance Industries Limited

Reliance Industries Limited (RELIANCE) in October 2022 announced the demerger of its financial services business (Reliance Strategic Investments Limited) into a separate entity named Jio Financial Services. Shareholders of RELIANCE will get one share of Jio Financial Services for every one share they hold in RELIANCE. The record date to determine the shareholders of RELIANCE who will be eligible for receiving the shares of Jio Financial Services has been set as July 20, 2023. You can check the …

[viswaram]

@Meher_Smaran

Let’s assume Reliance Industries closed at 3000 on 19th July,

On the next day, at the end of the Pre-open session, Reliance industries closes at 2800.

Gentlemen’s agreement??

what if reliance closes at 3100 on pre-open 20th?

[Jason_Castelino]

@Meher_Smaran

Let’s assume Reliance Industries closed at 3000 on 19th July,

At least for assumption sake can’t we take 2600 instead of 3000?
What’s your plan? Nifty to 20k tomorrow?

[Meher_Smaran]

@viswaram

what if reliance closes at 3100 on pre-open 20th?

In a bakery, if full cake was at 400 rs yesterday and if the same half cake is available at 500 next day, I doubt if there would be any takers for it

On a serious note:

Source : https://www.nseindia.com/products-services/equity-market-special-pre-open-session

[Meher_Smaran]

@Jason_Castelino

What’s your plan? Nifty to 20k tomorrow?

We need to think a bit about bears as well. there’s no where to hibernate right now. its raining heavily.

[Jason_Castelino]

@Meher_Smaran

We need to think a bit about bears as well. there’s no where to hibernate right now. its raining heavily.

That’s what I too want. You are too optimistic to assume 3k. I would like to see lower value of reliance in your example. You know at least feel good about it. For a change am not that bullish right now.
Obviously short term.

[Meher_Smaran]

@Jason_Castelino

You are too optimistic to assume 3k.

3k just sounded good and also easy to understand for others

@Jason_Castelino

For a change am not that bullish right now.
Obviously short term.

Most of the sensible investors are cautious/cautiously optimistic (I still donno what that means), Markets may test the patience of these folks.

[viswaram]

@Meher_Smaran

half cake is available at 500 next day

some1 who is visiting the shop first time will not know about this.

years back i made a similar blunder - bought shares of RCOM thinking Jio was theirs

[Jason_Castelino]

@Meher_Smaran

3k just sounded good and also easy to understand for others

Yeah I know. I replied for the sake of replying. I guess am getting too active here. I wanna say something everywhere.

[Meher_Smaran]

@viswaram

years back i made a similar blunder - bought shares of RCOM thinking Jio was theirs

That’s some story Tell us more about it

@viswaram

some1 who is visiting the shop first time will not know about this.

One difference is, this shop will have lakhs of customers at the same time. so, this customers gets lost in that ocean. this is like bakery in railway station

[viswaram]

@Meher_Smaran

That’s some story Tell us more about it

fortunately lot of idiots like me also purchased it,

when i realized i exited immediately. luckily it had gone up quite a percent.

[Meher_Smaran]

Someone (new?) must’ve casted their magic spell like he did for all others who flagged

[Jason_Castelino]

@Meher_Smaran

That’s some story Tell us more about it

Keep it for our virtual meet day. We are gonna meet ‘soon’

[Jason_Castelino]

@Meher_Smaran

Someone (new?) must’ve casted their magic

Trust me. I actually come here every now and then just to check the latest update. I missed the posts yesterday. I guess there was some issue.

[Chirag1]

Last week the thought was LTIM will be promoted to N50 but with news yest that Jio Fin will be included in N50 and other indices, around the same time RIL was up and LTIM was hammered.

Looks like there will be RIL twins in N50. Hypothetically, with 1:1 and 18L Cr Mkt cap split, they are still both capable of remaining in N50.
I am not aware if Jio Fin will be deliberately excluded because of some rules though. like LIC with 4L mkt cap still not eligible. (low free float)

[Jason_Castelino]

@Chirag1

Looks like there will be RIL twins in N50.

It will be only till Jio financials are listed. Otherwise, nifty will see a sudden drop in value. Imagine reliance opens 200 points down because of demerger, nifty will fall directly 200 points. (Guessing without calculating). To nullify this, the demerger entity will remain only till the day it gets listed plus 3 days. It will even have constant price. In a way this is good. The weightage of reliance will drop.

[Chirag1]

I presume the demerged entity Jio Fin when Listed, will directly list back into N50 as the new units are credited to demat.
Thats what i meant, imagine removing 9L Cr Mkt Cap from Nifty Then they will have to do the extra-ordinary/special adjustment in Derivatives like incase of Large Dividend payouts.

[Jason_Castelino]

@Chirag1

Thats what i meant, imagine removing 9L Cr Mkt Cap from Nifty

How is it 9lakhs? Some 7 to 10 percent value of reliance will be down.

[Chirag1]

Hypothetically at 1:1 ratio. it was humour

[Jason_Castelino]

Oh okay. But I still think you are getting it wrong. Even if it’s 1:1 the value of shares won’t be the same.
Number of shares remain same. Reliance will be around 2600 and Jio will be around 200. What am I missing?