NMDC to be excluded from Nifty CPSE index over move to hive off steel arm

NMDC shares drop 5.3%; ONGC, Coal India and Bharat Electronics likely to see inflows of $31-46 million on account of the rebalancing

State-owned miner NMDC will be removed from the Nifty CPSE index following its decision to hive off its steel subsidiary NMDC Steel. The proposal has received shareholder’s approval.

According to an analysis done by IIFL Alternative Research, NMDC, which has nearly 5 per cent weightage in the Nifty CPSE index, could see outflows of over $100 million (nearly Rs 800 crore) on account of its exclusion. No new stock will get added to the index as a result, some of the existing members of the CPSE index will benefit due to the rebalancing.

ONGC, Coal India and Bharat Electronics (BEL) are expected to see inflows of between $31 million and $46 million on account of the rebalancing. The exact quantum of flows will depend on the change in share price between now and August 5, the adjustment date.

Shares of NMDC fell 5.3 per cent on Tuesday. The stock fell on account of a double whammy in form of CPSE index deletion and crash in iron-ore prices. NMDC’s is India’s largest iron-ore minor. Global iron ore prices have hit a seven-month low on fears that fresh Covid-19 outbreaks in China could impact demand.

The Nifty CPSE ETF, formed to help the government divest its holding in the underlying stocks, has assets under management of over Rs 17,000 crore. The index has gained nearly 6 per cent year-to-date.