June 23 (Bloomberg) -- Indian financial and engineering stocks will be the biggest beneficiaries of a revamp in the S&P CNX Nifty Index this week, according to UBS AG.
Starting on June 26, the weighting of stocks traded on the National Stock Exchange of India Ltd.’s gauge will be based on the amount of shares publicly available for trading, or the free float. Under the current system, the weighting is based on the total market capitalization.
ICICI Bank Ltd., the nation’s No. 2 lender, will benefit as the new method boosts the weighting of financial stocks by 8.6 percentage points to 23.1 percent and funds tracking the index are forced to alter holdings, UBS said in a report dated yesterday. Larsen & Toubro Ltd. will gain as engineering companies increase 3.3 percentage points to 12.1 percent.
“The index will be more widely followed now that it’s moving to a more efficient system,” Mumbai-based Suresh A Mahadevan, head of research at the Indian unit of UBS, said separately in a phone interview.
About 9 billion rupees ($185 million) are invested in funds that track the Nifty index, according to Dhirendra Kumar, managing director of Value Research Ltd., a firm that tracks Indian mutual funds.
The biggest losers will include Oil & Natural Gas Corp., India’s largest oil explorer, and NTPC Ltd., the country’s No. 1 electricity generator.
The Nifty is switching to the free-float market capitalization method used by its older rival, the Bombay Stock Exchange’s Sensitive Index, or Sensex, since September 2003.
Biggest Losers
The weightings of India’s majority state-owned companies will decline under the new method because they have a lower portion of shares available for trading. Oil & Natural Gas will lose 5.1 percentage points of its weighting, while NTPC will drop by 4.6 percentage points, UBS said, based on stock prices as of June 19.
Steel Authority of India Ltd., the nation’s second-biggest steelmaker, will decline 1.6 percentage points.
The free float for each company will be determined on the basis of the public shareholding, the exchange said in a statement March 24. Strategic investments by companies and the government as well as shares held by founders through American and global depository receipts will be excluded. Foreign direct investments will also be excluded from the free-float computation.
The following is a table of the five biggest gainers and losers after the exchange implements its new method, according to UBS.
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Company Weighting Change Weight in Index
Percentage Points Percent
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Biggest Gainers:
Larsen & Toubro Ltd. +4.2 7.5
ICICI Bank Ltd. +3.8 6.8
Infosys Technologies Ltd. +3.5 7.3
Housing Development Finance Corp. +2.5 4.9
HDFC Bank Ltd. +2.1 4.6
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Biggest Losers:
Oil & Natural Gas Corp. -5.1 2.9
NTPC Ltd. -4.6 1.5
Steel Authority of India Ltd. -1.6 0.8
Bharti Airtel Ltd. -1.4 4.3
Tata Consultancy Services Ltd. -1.3 1.5
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