How will Paytym and Zomato affect Nifty Next 50 returns?

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: April 8, 2022 at 6:00 am

Last Updated on August 22, 2022

NSE has recently changed its inclusion criterion which has allowed new companies like Paytm (One 97 Communications Ltd.), Zomato and Nykaa (FSN E-Commerce Ventures Ltd. ) to be part of the index from March 31st 2022. We had discussed what investors should do in this regard: Should I exit Nifty Next 50 because of Paytm, Zomato and Nykaa?

We now have the April 2022 Nifty Next 50 factsheet to better answer how the new entrants will affect Nifty Next 50 returns.

The Nifty Next 50 Free Float Market Capitalisation (Rs. Crores) spread with the positions of new entrants is shown below.

Nifty Next 50 Free Float Market Capitalisation (Rs. Crores) with the positions of new entrants indicated
Nifty Next 50 Free Float Market Capitalisation (Rs. Crores) with the positions of new entrants indicated

Since the weights are decided as per the free-float market capitalization, it should be obvious, that three of the south-bound stocks NYKAA, PAYTM and ZOMATO (the last two not yet profitable and not expected to be profitable in the near future) will not make a big impact to returns of Nifty Next 50. That the index needs no help from these to perform poorly is another matter! See: Is it time to exit from Nifty Next 50?

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    These are the weights of the new entrants

    1. SRF Ltd. SRF 3.38%
    2. Indian Oil Corporation Ltd. IOC 2.62%
    3. MindTree Ltd. MINDTREE 2.4%
    4. Zomato Ltd. ZOMATO 0.63%
    5. FSN E-Commerce Ventures Ltd. NYKAA 0.52%
    6. One 97 Communications Ltd. PAYTM 0.26%

    Of course, these weights are not set in stone and will change either way. At least for the next few months, loss-makers PAYTM and ZOMATO are unlikely to lead the course of the Nifty Next 50 bandwagon. Investors need not worry about their inclusion and continue investing in Nifty Next 50 provided they appreciate the risks of doing so and the investment is suitable for their need.

    In fact, we recommend investors do not peer into the portfolio of an active or passive mutual fund. They are likely to find something disagreeable. It is an unproductive exercise as they have no control or say over the portfolio.

    The full list of Nifty Next 50 stocks as of April 2022 with free-float market capitalization and weights is listed below.

    Security SymbolFree Float Market Capitalisation (Rs. Crores)Weight
    ADANIENT60506.74.81
    VEDL49129.73.9
    ADANIGREEN44555.73.54
    ADANITRANS44035.83.5
    SRF42506.93.38
    PIDILITIND40877.53.25
    DMART403383.2
    NAUKRI38059.43.02
    ICICIGI37034.82.94
    DABUR34167.52.71
    IOC33024.42.62
    PEL31924.82.54
    HAVELLS31537.62.51
    CHOLAFIN30924.52.46
    GAIL30951.32.46
    GODREJCP308832.45
    LTI30638.12.43
    MINDTREE30213.22.4
    MCDOWELL-N28907.62.3
    MARICO28449.32.26
    DLF25715.42.04
    PIIND24764.71.97
    AMBUJACEM24013.91.91
    SBICARD23689.41.88
    SIEMENS23029.31.83
    BANDHANBNK22714.81.8
    BANKBARODA22693.21.8
    COLPAL22450.31.78
    JUBLFOOD22042.11.75
    ICICIPRULI21231.91.69
    INDIGO21188.71.68
    NMDC20292.41.61
    ACC198571.58
    INDUSTOWER19608.61.56
    LUPIN19653.41.56
    BERGEPAINT18558.41.47
    BAJAJHLDNG16972.71.35
    BIOCON16723.61.33
    MUTHOOTFIN15753.21.25
    SAIL15561.61.24
    HDFCAMC15496.61.23
    TORNTPHARM14965.41.19
    BOSCHLTD13488.81.07
    GLAND11636.80.92
    PNB11381.60.9
    ZYDUSLIFE9742.230.77
    PGHH9177.590.73
    ZOMATO7886.660.63
    NYKAA6500.790.52
    PAYTM3244.870.26
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