Nifty Bank Rejig: Yes Bank, Union Bank shares set for millions in inflows as new entrants

The Nifty Bank index is set to add two new stocks from this month-end, with Yes Bank Ltd. and Union Bank of India Ltd. entering the index, in compliance with the new weightage guidelines issued by the Securities and Exchange Board of India (SEBI), the market regulator.

With this, the two lenders are set to bring in cumulative inflows worth $249 inflows together, as per analysts.

Of this, Yes Bank's cumulative inflow is estimated to be $140 million for over 550 million shares and Union Bank is set to receive inflows worth $109 million for 63 million shares. The flows will be received over four tranches over the next four months, as per Nuvama Alternative & Quantitative Research.

Inflow estimates across tranches: 

Stock	Tranche 1	Tranche 2	Tranche 3	Tranche 4
Yes Bank	$91 million	$13 million	$17 million	$18 million
Union Bank	$71 million	$9 million	$15 million	$14 million

Adjustment for the first tranche will take place on December 30, with the subsequent tranche adjustments taking place on January 26, February 26 and March 26 next year.

Post the addition, Yes Bank's weightage in the Nifty Bank would be 3.9% and that of Union Bank would be 2.6%, by the end of the four tranches, as per analysts.

The National Stock Exchange (NSE) on Monday, December 1, released the final guidelines with the Securities and Exchange Board of India (SEBI) weight concentration requirements.

The market regulator had told the stock exchange to reduce the weightage in indices that have futures contracts, which includes the Nifty Banks as well.

As per the final guidelines, the weightage of the top three constituents would be capped at 19%, 14% and 10%, respectively.

As per this, the weightage of HDFC Bank and ICICI Bank, which are the top two weighted stocks on the Nifty Bank, would see a gradual weight reduction, across the four tranches, starting the end of this month.

The changes are likely to be in effect from the close of December 30.

The top two lenders are likely to witness reduction in weightage amounting to $330 million each, spread over the four tranches, as per analysts.

HDFC Bank's weightage in the index, which is currently at 27.5%, will drop to 18.9%, post the rejig. Meanwhile, SBI's weightage, which is currently at 9.4%, will increase to 10%.

.Shares of Yes Bank and Union Bank were trading up to 3% higher on Tuesday.

The Nifty Bank was down over 170 points at 59,502.25 around 12 pm on Tuesday. It has risen by 1,390 points in the past month, 3,591.95 points in the last six months and 8,432.1 points this year, so far.

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