THE sprint for the Sensex to the 10,000-mark from 5,000 in May 2004 has triggered interesting changes in the weightage of index constituents.
During this period, the free float market capitalisation of Sensex has recorded a two-and-half fold rise to Rs 6,14,000 crore. Much of the rise has been contributed by Infosys, ICICI Bank and ITC.
The computation of the Sensex is based on the free float factor in contrast to the Nifty, which is based on market cap of stocks as the basis. The free float factor is the share of non-promoter holding in the equity of the index constituents.
Four of the top five stocks in the Sensex - Infosys, Reliance (adjusted for demerger), ICICI Bank and ITC have held their positions. Only HDFC has elbowed its way into the top five, pushing ONGC to the sixth position. The top five stocks by weightage accounted for about 40 per cent of the index, both at current levels and in May 2004.
Much of the churn in free float Sensex weightage has been concentrated in stocks that figure lower in the pecking order. The stocks that have seen their weightages rise sharply in the Sensex are Bharti Tele-Ventures, BHEL and Gujarat Ambuja Cements. Stocks that have slipped in rankings were Ranbaxy Labs, Tata Motors, Grasim Industries, Reliance Energy and Dr Reddy's Labs. Ranbaxy has been the only stock, which has suffered a decline in its free float market cap.
During this period the Sensex composition has also undergone a change. Three stocks- HPCL, MTNL and Zee Telefilms have made way for L&T, NTPC and TCS.
The entry of HDFC into the top five stocks and ICICI Bank and HDFC Bank increasing their standing among index constituents reflect the sharp rise in the financial services contribution to Sensex. L&T's entry into the index and the progress made by Gujarat Ambuja reflects the rising investor confidence in the cement and construction sector stocks. Suits pending against pharma companies in courts overseas led to the slide of Dr Reddy's and Ranbaxy in the rankings.