Tata Consumer could become next FMCG scrip added to Nifty: ICICI Securities

Avenue Supermarts, which operates DMart hypermarkets, has free-float market similar to Tata Consumer.
The benchmark Nifty 50 index could see addition of one more stock from the fast moving consumer goods (FMCG) space. According to an analysis done by ICICI Securities, Tata Consumer is on course to replace state-owned Gail India in the widely-followed index during the semi-annual review slated for March. The free-float market cap—a key parameter for index inclusion—of Tata Consumer Products is currently at Rs 36,000 crore, while that of Gail is about Rs 30,000 crore. If the Tata group firm that operates Starbucks cafes in India gets added to the Nifty index, it will join peers such as Hindustan Unilever, Nestle India and ITC in the bluechip index.

Avenue Supermarts, which operates DMart hypermarkets, has free-float market similar to Tata Consumer. However, it doesn’t meet index inclusion criteria of available for trading in the derivatives segment.

Tata Consumer Nifty inclusion could lead to buying by exchange traded funds (ETFs) worth Rs 760 crore.

“Currently, Nifty 50 ETF and index AUMs stand at Rs 126,100 crore. Gail currently has an estimated weight of 40bps in the index, while Tata Consumer is expected to enter the index with a weight of 60bps, entailing ETFs and index funds buying worth Rs760 crore,” ICICI Securities said in a note.

The brokerage expects stocks in the insurance, green energy and internet space to get added to the index in the near future.

“New-age stocks from insurance, green energy and internet space are the next candidates and reflects improving demand for such businesses in the economy.”

Adani Green, Info Edge and ICICI Lombard have index inclusion potential given their high market cap.

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