SBI life Insurance, Divi's Lab - Nifty 50 Stocks Reshuffle | Stocks for Beginners - YouTube

Friends, Whenever you invest, you feel like you invested in a small company and in the future, it will become big

When you actually invest in such companies and those companies become big

and one day you get a news stating that this company is going to enter Nifty 50

Imagine how good would you feel as an investor, investing in such companies

as you feel that you made the right decision

You might know in India's Index, Nifty 50, Companies keep reshuffling means some shares get off it

some shares get added. Recently news came stating that two stocks are going to be taken out of Nifty 50

and two new stocks are going to enter Nifty 50. What are the implications of investors here?

Should you invest in the companies which are going to be a part of the Nifty 50?

or should you be exiting the companies which are taken out of Nifty 50?

We will discuss these today and an important question today regarding Nifty 50 which every investor might have

I, Jagdeep Singh, Welcome you to Groww's Youtube Channel

Let's start with today's video

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cause I don't want you to miss any of our videos which will help you become a good and an intelligent investor

I will start with a few basic questions which will help you understand how a company enters Nifty 50

and what are the basic rules and questions which should come in an investor's mind?

Friends, the first question is how many times does Nifty 50 reshuffle?

The answer to this question is Nifty 50 gets shuffled two times in a year, in March and in July

Reshuffle news comes out before months and sometimes it gets delayed.

Say if at a particular date you got the news stating that these two stocks are going to enter and exit

but from when does it become effective

Which is the date on which index starts trading in the new stocks?

In September when Future & Options expire, from the very next day, the reshuffle gets effective

For example in the recent times' news was out stating Nifty 50 reshuffle about which I will tell you

the two companies which are going to enter and two companies which are going to exit

The new companies which have newly entered will become effective from 25th September

cause on 24th September Futures & Options will expire

From the very first day index will start trading and consider the weight of the new shares

Second question, How would you know the companies which would be eligible for entering Nifty 50?

Here every company which is a part of Nifty Next 50 and Nifty 100 are eligible for becoming a part of Nifty 50

These companies are eligible to become if they are in Nifty 100 but should also trade in Future & Options

Any companies which are included in Nifty 100 and traded in Future & Options are eligible to be included

The second criterion are related to Float Adjusted Market Capitalization related.

The company which are eligible need to have a float-adjusted market capitalization ratio

of 1.5 times the smallest company in that index

Now, what is Float Adjusted Market Capitalization?

Market Capitalization is equal to No. of shares * Market Price but Float adjusting market capitalization is

only those shares are eligible which are easily available in the market for buying and selling

the active shares are considered to be eligible which is why it is known as float adjusting market capitalization

it is not total market capitalization

Another criterion which is important for a company to enter Nifty 50 is

the company should have 100% trading frequency in the last 6 months

which means the company has traded in all the trading session in the last 6 months

if all these criteria meet this company is positioned right in Nifty 50

Coming to the second part of the video, let's talk about the two companies which are going to exit Nifty 50

First company's name is Zee Entertainment and the second company is Bharati Infratel Ltd

Don't get confused here. It's not Bharti Airtel, It's Bharti Infratel which is a different company altogether

The two companies which are going to enter are SBI Life Insurance and second is Divis Lab in Nifty 50

Let's go in detail about this company's performance in the last few years

Let's talk about the first company to enter Nifty 50, Divis Laboratory Ltd

Its share price is around Rs 3200. This company gave a return of more than 100%

which means if you would have invested a year ago your money would have gotten doubled

Its market capitalization is Rs 86000 Cr. Its PE ratio is around 53. In comparison with its peers, it's higher.

which means this company is available in premium

Company's revenue is June Qtr 2020 is Rs 1730 in comparison with Rs 1163 Cr in June Qtr 2019

We can see a huge jump here in its net revenue. Its Net Revenue increased from Rs 272 Cr to Rs 492 Cr

Company's operating profit margin has increased from 33% to 40%. Divis Lab has decreased its debt recently

This company is a debt-free company virtually

The name of the second company is SBI Life Insurance company. This company gave a return of 3% in one year

Its share is trading at Rs 868. From March bottom till now, this company has gone up by 60%.

This company's market capitalization is around Rs 86000 Cr and its PE ratio is around 60

Another interesting thing is in the last reshuffle HDFC Life insurance got included in Nifty 50

This is the second company from the life insurance company to enter Nifty 50

which means Nifty 50's weight has increased in the last few years towards the insurance sector

This is just a fact, I am sharing with you

The company's quaterly results were very good this quarter.

Their sales moved up from Rs Rs 9800 Cr to Rs 16000 Cr. Its net profit Rs 372 Cr to Rs 391 Cr in last Qtr

Let's talk about the companies which are going out of Nifty 50

The first company is Zee Entertainment. This company gave a - 25% return to its investors.

Before a year this share trades at Rs 360 which is now trading at Rs 200

Its market capitalization has come down to Rs 20000 Cr. Its PE ratio is quite high at around 73.

Quaterly result of ZEE entertainment was not good. Its sales have come down from Rs 2000 Cr to Rs 1300 Cr

Its net profit has taken a huge blow in comparison with 2019 wherein it went from Rs 531 Cr to 30 Cr

Coming to Bharti Infratel. It's trading at Rs 198. In last year this company has given -20% return to its investors

Since some time, there have been problems in the telecom sector cause of which this company was hit

Its market capitalization is around Rs 37000 Cr and its PE ratio is around 12%

Quaterly results of the company were its sales went down from Rs 1700 Cr to 1635 Cr this year

This company's net profit has reduced from Rs 887 Cr to Rs 704 Cr in last one year

I spoke about two companies going to enter and two companies going to exit Nifty 50

Now I will clear the fact many people say that there is always a huge buying when a company enters Nifty 50

Talking about Divis Lab and SBI Life Insurance, Analysts say there can be more than 700 Cr's buying in Divis Lab

In SBI Insurance there can be more than 600 Cr's buying.

When a company enters Nifty 50, why is there a lot of buying?

There are many ETFs which track Nifty 50's performance which

means ETF gives the same return as the weight of the Nifty

When a company enters Nifty 50, the index, mutual fund, ETF which is keeping a track also reshuffles

they buy the stocks which are going to enter NIfty 50, they even sell the stocks which are going out of Nifty 50

It is being said that we can see a Rs 600 CR outflow from Zee Entertainment and Bharti Infratel

Friends, this can be the one-time rebalancing cause of which we can see the buying and selling

this should not be your only one reason to invest in a company.

If you are thinking to invest in these two companies just cause

they are newly entering, it will be a completely wrong approach. I will come back to my main point here that if

you are thinking of investing, then look at the long term perspective. If you feel the insurance sector will do well

then you can think of investing in SBI Life Insurance, but before that, you should know its business model

its performance, its management and after doing good analysis, you should think of investing

Just with the thought that a company is entering and you want to buy or if a company is exiting, to exit it

is not a good approach. Keep your fundamental rules intact. Choose a good company after analyzing

think of investing only after that

Today's video was completely on educational purposes. The whole discussion was fact-based.

We do not recommend buying and selling any shares.

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