Why you should buy BSE, IndiGo shares this September
What's the story
Asia's oldest stock exchange, BSE, and InterGlobe Aviation, the parent company of IndiGo, are likely to be included in the Nifty 50 index during its next review. The changes are expected to be effective from September, giving a bump to their stock prices. Meanwhile, IndusInd Bank and Hero MotoCorp may be removed from the index as part of this reshuffle.
Index eligibility
BSE and InterGlobe's stock performance
Despite being listed only on NSE, BSE meets the necessary listing and trading criteria for Nifty 50 index inclusion. The upcoming review is likely to be conducted in August, with changes taking effect from the following month. At the time of writing, shares of BSE were up over 2% at ₹2,745 apiece, while InterGlobe Aviation's stock price gained by 0.75% to ₹5,431 per share.
Review procedure
Nifty 50 index's review schedule
The Nifty 50 is reviewed semi-annually, based on six-month data ending January 31 and July 31. The changes are made in March and September. To determine the stocks that enter this prestigious index, NSE considers the average six-month free-float market cap as of the cut-off date. This is a key criterion for index eligibility.
Share performance
BSE's recent surge and stock movement
BSE shares have surged nearly 120% from their March lows, thanks to a surge in equity derivatives trading and speculation around the upcoming IPO of bigger peer NSE. However, recently, the index provider's stock was placed under the Additional Surveillance Measure (ASM) framework due to its unusual price movement, high volumes, and concentrated client activity.
Trends
InterGlobe and IndusInd Bank's performance
InterGlobe Aviation's stocks have been on a steady rise, gaining 22% over the past six months due to rising passenger traffic. Jefferies has called the IndiGo parent a 'unique, strong' franchise with over 60% market share in domestic air travel. In contrast, IndusInd Bank shares have plunged by 11% over the past six months amid fraud and regulatory concerns.
Market analysis
A look at Hero MotoCorp
Hero MotoCorp's stock has also been lackluster over the past six months, owing to weak demand and high borrowing costs. The company's shares were down 2% at ₹4,256 apiece at the time of writing. This underperformance could be a factor in its potential removal from the Nifty 50 index during this review cycle.