Going forward, it expects the Sensex EPS to be Rs 1,870 for FY19 and Rs 2,241 for FY20, an increase of 36 and 20 percent, respectively.
Based on the reconstitution of Sensex from June 18, 2018, the earnings per share (EPS) of Sensex is set to get an upgrade of 1.7/1.8 percent, Motilal Oswal has said in a report. The brokerage house has attributed this to the increase in free flat PAT (+2.3 percent/2.4 percent for FY19/FY20) than in free float market cap (0.5 percent).
Going forward, it expects the Sensex EPS to be Rs 1,870 for FY19 and Rs 2,241 for FY20, an increase of 36 and 20 percent, respectively. “Excluding corporate banks such as SBI, ICICI Bank and Axis Bank, the profits of Sensex are expected to be posted around 24 percent for FY19,” the report added.
Speaking on the rejig, the brokerage observed that weight of metals is set to increase by 130 basis points to 2.6 percent, while healthcare counterpart is set to hit an eight-year low.
“Vedanta will be included in the benchmark, with weight of 1.3 percent, taking Metals’ weight to 2.6 percent (+130bp). With this inclusion, the metals sector will have two stocks in the benchmark (Tata Steel having 1.3 percent weight),” analysts at the firm wrote in the report.
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Meanwhile, with the exit of Dr Reddy’s Labs (weight: 0.8 percent), healthcare stands to lose the most in terms of weight (-70bp to 1.7 percent). Earlier, in December 2017, Cipla and Lupin were excluded from the benchmark, Motilal Oswal further observed.
“Healthcare’s weight will now be at an eight-year low, with the exclusion and also due to the significant underperformance of the sector over the last two years. Sun Pharma (weight: 1.7 percent) will be the only healthcare stock in the benchmark index.”
Having said that, the least impacted sectors would be oil & gas, NBFCs, capital goods, utilities, PSU banks, telecom and infrastructure. Of the top-10 stocks to be most impacted, four are from financials.
Stocks to be hit
According to the report, the top 10 stocks to be impacted the most by the reshuffle are HDFC Bank (-6bp), Reliance Inds (-5bp), HDFC (-5bp), Infosys (-4bp), ITC (-4bp), ICICI Bank (-3bp), TCS (-3bp), L&T (-3bp), Kotak Bank (-2bp), and Maruti (-2bp).
“Top-10 stocks currently constitute 66.1 percent of the Sensex. Post reshuffle, this is likely to come down to 65.7 percent (-40bp). 58 percent of Sensex constituents have been unchanged over 10 years,” the report added.