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The weight of India’s banking sector is set to go up to historical levels in the S&P BSE Sensex when it is reconstituted on Monday.
YES Bank and IndusInd Bank will replace pharma company stocks Lupin and Cipla in the Sensex as part of this reconstitution.
With the changes in the index, the weightage of the Banking, Financial Services and Insurance (BFSI) sector in the BSE 30 will touch its all-time high level, whereas the weightage of the healthcare sector will hit a seven-year low.
Any change in index weightage can result in portfolio churn for major funds in the long run.
IndusInd Bank and YES Bank will be included in the benchmark, with weights of 2.6 per cent and 1.7 per cent, respectively, taking private banks’ weightage to 28.1 per cent (up 360 basis points).
BFSI will have a weight of 40.1 per cent (up 330 bps) post the reshuffle, which will be more than the combined weights of technology, consumer and auto. The weightage of financials in the Sensex has more than doubled since financial year 2009, a report from Motilal Oswal pointed out.
The report further said that BFSI and technology (weight: 51.4 per cent; nine companies) will now account for more than half of the index.
The least-impacted sectors from the new inclusion will be Capital Goods, Utilities, PSU Banks, Telecom, Metals and Infrastructure, the report said.
With the reshuffle, four financial firms will be impacted — in terms of weight — out of the top 10 components in the index. HDFC Bank will lose 32 basis points followed by RIL (26 bps), HDFC (24 bps), ITC (19 bps), Infosys (18 bps), ICICI Bank (17 bps), L&T (13 bps), TCS (11 bps), Maruti Suzuki (11 bps) and SBI (10 bps).
“Aggregate weight of the existing 29 Sensex stocks will decline by 270 bps,” it said.
The BSE Sensex portfolio comprises 31 stocks; it has DVR (differential voting rights) shares of Tata Motors along with the ordinary shares of the auto major. Of these 31 stocks, 18 have been part of the index for the past 10 years.
Of these 18, three each are from technology and auto sectors. Private banks, consumer and oil and gas have two stocks each, while PSU Banks, NBFC, Capital Goods, Metals, Telecom and Utilities have one stock in the index. The combined weight of these 18 stocks will decline to 78.7 per cent from 79.1 per cent 10 years back.
The Sensex EPS for FY18/FY19 is expected to see an upgrade of 0.2-0.4 per cent due to marginal increase in free float, the report said.
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