Tata Motors Stocks: Sensex rejig: Tata Motors to replace Dr Reddy’s with an inflow of $124 million

In the latest round of rejig of the 30-share pack, Tata Group’s automobile arm

will replace the drug major Dr Reddy’s Laboratories, said an report from Nuvama Alternative and Quantitative Research.

Tata Motor’s will see an inflow of $124 million with a weightage of 1.1% on the index. On the contrary, Dr Reddy’s Labs, which has a weightage of 0.8% on the index, will see an outflow of $90 million, the report added.

S&P indices has modified its Sensex methodology, said Abhilash Pagaria, Head, Nuvama Alternative and Quantitative Research. He believes that this change in criteria has played an important role in letting Tata Motors make the cut.

In order to mitigate replication issues due to stocks not having derivative contracts, Asia Index Private is increasing the derivative linkage factor to 100% so that all the stocks will be required to have a derivative contract in order to be eligible for the index selection, he said.

“As per our understanding of the official notice, we strongly believe Tata Motors DVR does not qualify for inclusion,” he added. “We have written to S&P Indices and are awaiting final clarity.”

According to the report from Nuvama Wealth Management’s arm, there are no noteworthy weight changes in existing constituents in the current rejig, barring a few minor ones.

Among the smaller fixed,

, , and are set to lose 1-4 basis points in their respective weightage on the index, which is likely to result in an outflow of $2-6 million.

Amongst all the widely tracked passive indices, S&P Sensex has the least passive tracking and Nuvama ruled out the possibility of a very significant price action because of this announcement.

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