Nifty 50 Rebalance 2022: Apollo In, IOC Out as NSE Eases Bar

NSE announces index reshuffle across key benchmarks

National Stock Exchange (NSE) announced a rebalancing of three of its indices: Nifty 50, Nifty Bank (Bank Nifty), and Nifty Next 50. The changes were part of the exchange’s periodic review by the Index Maintenance Sub-Committee - Equity (IMSC) of NSE Indices Limited. NSE also revised the eligibility criteria used for inclusion in Nifty equity indices. The reshuffle matters because many index funds, ETFs, and benchmark-tracking strategies adjust their holdings around such changes. It can also influence stock demand due to passive flows. The changes were notified around February 24, with the revised constituents becoming effective from March 31, 2022, at the close of March 30, 2022. Some market reporting also referred to the reconstitution taking effect from April 1, 2022, reflecting post-close implementation.

What changes in Nifty 50: Apollo replaces Indian Oil

The headline change in Nifty 50 was the entry of Apollo Hospitals Enterprise Ltd. Apollo Hospitals was set to replace Indian Oil Corporation Ltd (IOC) in the 50-share benchmark index effective March 31, 2022. This was described as an upgrade for Apollo Hospitals because it was part of the Nifty Next 50 index before moving into Nifty 50. The replacement was also applicable to the Nifty50 Equal Weight Index, according to NSE’s circular. Market commentary around the change highlighted that IOC had the lowest free-float market capitalisation among Nifty 50 constituents at the time. It also noted Apollo’s higher free-float market capitalisation and its presence in the futures and options (F&O) segment.

Bank Nifty change: Bank of Baroda in, RBL Bank out

NSE’s periodic review also resulted in a change within Bank Nifty. Bank of Baroda was included in the banking index while RBL Bank was excluded. For investors tracking banking sector performance through the Bank Nifty, this changes the composition of exposures that come through passive products and benchmark-linked mandates. The timing of such changes typically concentrates adjustments around the effective date, as index-tracking funds align portfolios.

Nifty Next 50 sees multiple inclusions including recent IPO names

NSE’s review brought a notable set of additions to the Nifty Next 50 index. The incoming stocks were FSN E-Commerce Ventures Ltd (Nykaa), Indian Oil Corporation Ltd (IOC), MindTree Ltd, One 97 Communications Ltd (Paytm), SRF Ltd, and Zomato Ltd. These replacements came in place of Apollo Hospitals Enterprise Ltd, Aurobindo Pharma Ltd, Hindustan Petroleum Corporation Ltd (HPCL), Indraprastha Gas Ltd (IGL), Jindal Steel & Power Ltd, and Yes Bank.

A key detail mentioned in the coverage was that three of the stocks added to the index were companies that listed through IPOs in the second half of 2021. The Nifty Next 50 is also important structurally because only stocks that are part of Nifty Next 50 are eligible to enter Nifty 50.

Eligibility criteria revised: minimum listing history cut to one month

Alongside the constituent changes, NSE modified the eligibility criteria for inclusion in Nifty equity indices. Under the revised methodology, constituents should have a minimum listing history of 1 calendar month as on the cut-off date. The earlier requirement was a minimum listing history of 3 calendar months. The change applied with immediate effect to all Nifty equity indices.

NSE also changed the requirement for companies traded subsequent to a scheme of arrangement for corporate events. Here too, the minimum listing history requirement was reduced to one month from three months. Market participants linked this rule change to the entry of recently listed companies into the Nifty Next 50.

Market reaction: Apollo Hospitals shares jump after announcement

Apollo Hospitals shares rose sharply after the exchange announced its inclusion in Nifty 50. Reportage cited the stock jumping more than 8% to an intraday high of Rs 4,745. The move was linked to index inclusion expectations and the reconstitution timeline. Another detail reported in Hindi-language coverage was that Apollo’s entry into Nifty 50 would be with a 0.6% weightage.

Separately, coverage described Apollo Hospitals as set to become the first healthcare services company to be included in the benchmark Nifty 50 index. This framing underlined the sector mix shift within the index, with healthcare services gaining representation in the headline benchmark.

Key changes at a glance

Why this reshuffle matters for index-linked investors

Index rebalancing can create mechanical buying and selling as passive funds mirror new compositions. Stocks added to a benchmark may see incremental demand as funds seek to match index weights, while stocks removed may face selling pressure from the same set of investors. In this case, Apollo Hospitals moving into Nifty 50 can matter because Nifty 50 is widely tracked by domestic and global investors through ETFs and index funds.

The rule change reducing minimum listing history from three months to one month can also influence the speed at which newly listed companies become index-eligible. That, in turn, can affect how quickly liquidity and passive ownership build in recently listed names. For Nifty Next 50 specifically, the adjustment was cited as enabling recently listed stocks to enter the index, and it reinforces the index’s role as the feeder pool for future Nifty 50 entrants.

What to watch next

NSE stated that the changes were part of its periodic review process and were implemented from the specified effective date. For investors, the practical follow-through is usually seen through portfolio adjustments by index funds around the close of the adjustment date. The revised listing-history criteria is also likely to be watched in future review cycles because it changes the pathway for new listings and corporate-event-related listings into Nifty indices.