Sensex Composition in 2010
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Fundamental
Forum Discription: Discuss the operations and finances of any of your companies.Make the other participants aware on the investment opportunities available in a stock on PE free cash flow etc
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=937
Printed Date: 04/May/2025 at 2:50pm
Topic: Sensex Composition in 2010
Posted By: smartcat
Subject: Sensex Composition in 2010
Date Posted: 05/Jun/2007 at 1:18pm
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BSE Sensex (and the Nifty) only keeps the winners. Companies have to constantly create wealth and increase their market cap or they will be left behind.
If we go down the memory lane, we had companies like Bombay Burmah, Mukand etc in the Sensex - and they have now been reduced to 'small caps'. Just three years ago, we had companies like Tata Power, HPCL, MTNL, Nestle, Castrol etc in the index. While these companies are still fairly large, they have been overtaken by nimbler companies like Bharti, RCom, Maruti etc.
You can check the complete history of Sensex replacements http://www.bseindia.com/about/abindices/bse30.asp - here
Now take a look at the http://www.equitymaster.com/india-markets/bse-replica.asp - current index constituents . Which are the companies in this list which would probably drop off in the next 3 years? These should be the companies which would grow at a slower rate than the other companies. My picks -
BAJAJ and HERO HONDA: These are 15% CAGR companies. And people in India would probably go purchase cars rather than bikes.
GUJ AMBUJA & ACC: Single commodity players generally don't last for long because of demand/supply issues.
DR. REDDY, RANBAXY & CIPLA: Indian pharma companies are not innovators. They are just a bunch of reverse-engineers.
REL ENERGY: Another 15 - 20% CAGR company.
SATYAM: A little more squeeze from the rupee and Satyam will drop down to a 15% CAGR company. Also a good takeover candidate (by IBM, EDS etc).
We will get to the replacement companies later.
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Replies:
Posted By: kanagala
Date Posted: 05/Jun/2007 at 1:42pm
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Pharma companies might able to stay. They are getting more and more global. My gut feeling is, some of them might become a global giant. I am not sure about the innovation part. I am not sure about their reverse engineering, I always thought we have the best brains in pharma industry?
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Posted By: basant
Date Posted: 05/Jun/2007 at 1:53pm
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Smartcat: Over the next 5 years we should see representation from Retail, and media. I am convinced on that. Though it is perfectly debatable wjhehther Pantaloon would get in there or Reliance Retail or both but a representation will be there for sure!
Similarily as media companies cross the billion dollar threshhold they would qualify for the same. From my memory except for Zee, Sun, Dish TV and Tv18 there are no other billion dollar companies in the media sector!
We idscussed some of these names in this thread:
http://www.theequitydesk.com/forum/forum_posts.asp?TID=498 - http://www.theequitydesk.com/forum/forum_posts.asp?TID=498
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Posted By: catchsudipto
Date Posted: 05/Jun/2007 at 2:58pm
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Dear Sir,
What about those BIG real estate companies, specially Unitech and DLF. Do they have a chance to pip into sensex composition in the near future.
They are already multibillon dollar company.
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Make your Life as simple as possible.
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Posted By: smartcat
Date Posted: 05/Jun/2007 at 3:29pm
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Basant, since the topic is similar, you might want to merge this thread with the old one.
| I am not sure about the innovation part. I am not sure about their reverse engineering |
There are 2 types of pharma companies -
- The innovators
- The Generics Players.
The innovators research the disease for years, experiment on chimpanzees and humans and finally file release the drug in the market. They file for patent protection and earn in billions if the drug turns out to be a blockbuster like Lipitor or Viagra. The main innovator companies are Merck, Pfizer, Sanofi Aventis etc.
The generic players research the existing drug (rather than a disease). They literally find out what the composition is and then re-create the drug. After the patent for the innovator drug expires after a few years, the generic companies like Ranbaxy, Dr. Reddy & Teva (of Israel) are allowed to sell the much cheaper variants of the innovator drugs in the market.
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Posted By: smartcat
Date Posted: 05/Jun/2007 at 3:34pm
| we should see representation from Retail, and media |
Pantaloon should definitely make it to the index - but it might not happen in 2010. TV18 can become a giant cap and get a sensex entry ONLY IF Web18 starts generating serious revenues. NW18 will never get an entry - because it is mostly a holding company.
It's sad we don't have our own Walt Disney or Time Warner or News Corp yet.
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Posted By: deveshkayal
Date Posted: 05/Jun/2007 at 3:40pm
My pick: DLF,Unitech,TV18 and Pantaloon will be included in Indices...
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"You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett
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Posted By: catchsudipto
Date Posted: 05/Jun/2007 at 4:10pm
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Hi
any guess work on those looser stocks ( out of the sensex)
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Make your Life as simple as possible.
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Posted By: basant
Date Posted: 05/Jun/2007 at 4:35pm
Originally posted by smartcat
| we should see representation from Retail, and media |
Pantaloon should definitely make it to the index - but it might not happen in 2010. TV18 can become a giant cap and get a sensex entry ONLY IF Web18 starts generating serious revenues. NW18 will never get an entry - because it is mostly a holding company.
It's sad we don't have our own Walt Disney or Time Warner or News Corp yet. |
GBN has all the characteristics to make an Indian Time warner (not on that scale) though.
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Posted By: xbox
Date Posted: 05/Jun/2007 at 7:31pm
Loss of IT in index and inclusion of few real estate, retail, petro, financial companies are expected.
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Don't bet on pig after all bull & bear in circle.
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Posted By: smartcat
Date Posted: 05/Jun/2007 at 10:41pm
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Some of the Nifty stocks like Suzlon, ABB and Siemens might make an entry in 2010 if the current growth rate in capital goods space sustains. Suzlon is almost a Rs. 40,000 crore company.
If financial companies make it to the Sensex, then it will probably be lead by Reliance Capital. However, I feel that, like Pantaloon, it will make an entry into the Sensex only later - not by 2010. Because there are lots of faster growing large companies.
Idea Communications is a low profile stock which can barge into the Sensex. It has a current market cap of around Rs. 30,000 crores. If it buys BPL mobile or merges with Spice Tele, it will definitely go places.
Along with DLF, other future IPOs like Vodafone Essar, Hyundai Motors or Oil India mess up the calculations a bit.
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Posted By: basant
Date Posted: 05/Jun/2007 at 10:03am
Index weightages are assigned on the basis of industry representation so while Pantaloon could find it easier (represent the retail sector) idea has a Bharti waitinmg in the Index for competition.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Posted By: smartcat
Date Posted: 05/Jun/2007 at 11:50am
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This I didn't know - I always thought the Top 30 market cap companies, irrespective of their sector, make an entry into the Sensex.
Do indices have some kind of guidelines as to allow only X number of companies from a particular sector? Note that there are already 4 software companies in Sensex (Infy, TCS, Wipro, Satyam)
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Posted By: basant
Date Posted: 06/Jun/2007 at 1:03pm
These four have become very big now if you include companies on the basis of mkt cap only the index will lose its broad based approach!
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Posted By: go4lalit
Date Posted: 06/Jun/2007 at 8:20pm
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I do not think the sensex composition is based on Industry reprentation. Otherwise we would had Zee in the sensex. Media now has no reprentation in sensex. It is purely based on free float market cap.
http://www.indiabulls.com/equities/market/Real_time_info/markets/BSESensitivity.htm - Link to free float cap.
I see Bajaj(due to spin off), Hero Honda and Rel Energy going out of Sensex. Who will come in will depend on free float ... DLF/Unitech/Suzlon/Idea are strong candidates. Other companied I do not know abt free float.
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Posted By: kulman
Date Posted: 06/Jun/2007 at 10:43pm
How about the merged entity of AirIndia+Indian Airlines in sensex by 2010?
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Life can only be understood backwards—but it must be lived forwards
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Posted By: BubbleVision
Date Posted: 06/Jun/2007 at 10:56pm
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Lalit...Zee was in Sensex as recently as last year, if my memory does not fool me.
You can check out the changes in sensex composition on the bse site.
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Posted By: go4lalit
Date Posted: 06/Jun/2007 at 11:03am
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Yes Zee was in the sensex. What I mean to say, Zee moved out of sensex becoz its freefloat cap. And the replacement was not becoz of industry represntation by another stock.
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