Zomato & Jio Financial Likely to Enter Nifty 50 in March Overhaul, Set for $1.1 Billion Passive Inflows

In its latest report, domestic brokerage firm JM Financial reaffirmed its projection that food delivery giant Zomato Ltd. and financial services company Jio Financial Services (JFS) could secure a place in the Nifty 50 index during its upcoming rebalancing, scheduled for March 2025.

Potential Inclusions and Exclusions in Nifty 50

Conversely, JM Financial anticipates that FMCG major Britannia Industries and state-owned oil marketing company Bharat Petroleum Corporation Ltd. (BPCL) are likely to be dropped from the benchmark index. Interestingly, the brokerage initially expected that Eicher Motors would be removed instead of Britannia Industries but has since revised its forecast.

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The official announcement regarding changes to the Nifty 50, along with other NSE indices, is expected by the end of February 2025, with the revised index composition taking effect from March 31, 2025. These adjustments are based on the average free-float market capitalization recorded between August 1, 2024, and January 31, 2025.

Criteria for Inclusion in Nifty 50

To be eligible for inclusion in the Nifty 50, a stock must be a part of the Futures & Options (F&O) segment. The potential addition of Zomato and JFS follows the National Stock Exchange’s (NSE) decision in November 2024 to expand the F&O segment by incorporating 45 additional stocks, including Zomato and Jio Financial Services. This move is expected to enhance liquidity and increase trading activity in these stocks.

Expected Market Impact

If Zomato and Jio Financial Services are included in the index, it could result in significant passive inflows. According to JM Financial’s estimates, Zomato may attract around $702 million in passive investments, while JFS could see inflows of approximately $404 million. Collectively, the two companies could bring in passive inflows totaling $1.11 billion, as index funds and exchange-traded funds (ETFs) tracking the Nifty 50 will be required to adjust their holdings accordingly.

On the flip side, the removal of BPCL and Britannia Industries could lead to passive outflows of approximately $240 million and $260 million, respectively. With these two companies exiting the index, the Nifty 50 is expected to witness combined outflows of around $500 million. Such changes could impact the stock prices of the companies involved, as well as influence investor sentiment in the broader market.

Implications for Investors

The anticipated changes in the Nifty 50 index hold significant implications for institutional investors, mutual funds, and passive index trackers. Stocks included in the benchmark index often experience increased demand from passive funds, leading to short-term price appreciation. On the other hand, stocks removed from the index may face selling pressure as institutional investors rebalance their portfolios.

The inclusion of Jio Financial Services would further strengthen Reliance Group’s presence in the Nifty 50, as the company was spun off from Reliance Industries in mid-2023. Meanwhile, Zomato’s potential entry highlights the growing influence of technology-driven consumer businesses in India’s equity markets. The food delivery platform has witnessed substantial growth over the past few years, expanding its operations and improving its profitability.

For BPCL and Britannia Industries, an exit from the Nifty 50 may impact their visibility among large institutional investors and reduce their weightage in passive investment portfolios. However, these companies continue to remain strong players in their respective sectors, and analysts believe their long-term fundamentals remain intact.

Broader Market Trends

The expected reshuffling of the Nifty 50 aligns with broader market trends favoring new-age technology companies and financial services firms over traditional industries. The increasing dominance of digital businesses in India’s stock market reflects a shift in investor preference toward high-growth, asset-light business models.

Moreover, the upcoming Nifty 50 rebalancing serves as a reminder of the evolving nature of India’s equity markets, where companies must continually adapt to market conditions, regulatory changes, and investor expectations to maintain their positions in key indices.

As the official announcement for the Nifty 50 rebalancing approaches, market participants will closely monitor developments and potential adjustments in fund allocations. While inclusions and exclusions in the index primarily impact institutional investors, retail investors should also stay informed, as such changes can influence stock performance and market trends in the near term.

With Zomato and Jio Financial Services poised for potential inclusion and BPCL and Britannia Industries at risk of exclusion, the upcoming Nifty 50 reshuffle is set to bring significant changes to India’s equity landscape.