Investors who own HDFC shares as of the merger's record date, which is Thursday 13 July 2023, will be entitled to receive HDFC Bank shares in the merger's share distribution. The current HDFC stockholders will own 41% of the bank. For every 25 shares of HDFC stock a shareholder has, they will receive 42 shares of HDFC Bank. HDFC Bank, after the merger, will be the second largest Indian bank behind the state-owned SBI and the fourth most valuable lender in the world. Nifty would replace HDFC with LTMindtree and Sensex with JSW Steel. Jindal Steel will join the Nifty Next 50, while JSW Steel will take HDFC's place on the Sensex.
With HDFC Bank taking over as the index's most heavily weighted component and LTIMindtree making its debut, the Nifty 50 is sporting a fresh new appearance. HDFC Bank, now merged with its parent company, has surpassed Reliance Industries as the benchmark index's primary component as of July 13. HDFC Bank is returning to its roots. HDFC and HDFC Bank were more heavily weighted than RIL on the Nifty in September of 2017. The merged company's 100% public shareholding has allowed it to reclaim the top spot. However, with a market capitalization of almost Rs 18.69 lakh crore, Reliance Industries remains the largest Indian firm. In the 20 years since the Nifty 50's inception, RIL is the only stock to consistently rank among the index's top 10. Analysts predict that Jio's weightage will remain above 10% even after the demerger of Jio Financial Services. On the other side, HDFC Bank has come a long way. In 2002, it ranked 14th, carrying only 1.8 percent of the total. Over 20 years later, it still stands head and shoulders above the rest of the Nifty 50. HDFC Bank as a whole has a market valuation of Rs 12 lakh crore.
Numerous index funds, hedge funds, and exchange-traded funds use indexes as a benchmark for their allocation, making it crucial to monitor index weights. Traders and investors may react positively or negatively to news of a shift in the Nifty 50 index. Since both HDFC shares will be changed to HDFC Bank, however, ETFs benchmarked to the Nifty 50 would not see any material redemption as a result of this transaction. For every 25 shares of HDFC, a shareholder will receive 42 fully paid-up shares of HDFC Bank.
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Bank Nifty weightage?
The NSE prohibits any one stock from accounting for more than 33 percent of total market capitalization and any group of stocks from accounting for more than 62 percent of total market capitalization. According to studies and research this will result in passive inflows of $70 million, as HDFC Bank's weight in the Bank Nifty index increases from 26.90% to 29.10%. HDFC Bank, ICICI Bank, and State Bank of India are the top three banking index companies, accounting for a combined weight of 61.80%. After the merger, this figure will rise to 62 percent.
|Company Name||Post Merger Weight in Nifty||Post Merger Weight in BankNifty|
|HDFC Bank Ltd + HDFC||14.43%||29.10%|