‘Most Ridiculous’: Sandip Sabharwal Questions Zomato & Jio Financial’s Inclusion in Nifty50
The Nifty50 index is undergoing a major reshuffle, with Jio Financial Services and Zomato being added to the list, replacing companies like Britannia Industries and BPCL. This change, set to take effect on March 28, has sparked strong reactions from market experts, with Sandip Sabharwal criticizing the decision. He referred to the inclusion of these two companies as “ridiculous,” arguing that they lack a meaningful track record as listed entities.
Criticism of Zomato and Jio Financial’s Inclusion
Sabharwal expressed concerns over the decision to include companies without a proven track record in the Nifty50 index.
- Zomato and Jio Financial are either loss-making or have not established themselves as viable businesses.
- He warned that their inclusion could artificially inflate the Nifty’s PE ratio, misleading investors about the true performance of the index.
- Sabharwal emphasized that companies should have a solid business history as listed entities to be considered for such prestigious indices.
Reshuffle Across Multiple Indices
In addition to changes in the Nifty50, the Nifty Next50 and other indices are also undergoing adjustments.
- The Nifty Next50 will see seven new stocks such as Bajaj Housing, Hyundai Motor India, and Swiggy, while stocks like Adani Total Gas, BHEL, and IRCTC are being removed.
- The Nifty100 index will also be updated with additions like Swiggy and Hyundai Motor India.
- Additionally, Nifty Midcap150 and Nifty Smallcap250 will experience several replacements.
Market Outlook: Uncertainty Ahead?
While there has been some stability in small and mid-cap stocks, Sabharwal remains cautious about the future direction of the market.
- He likened the current market to a “tennis ball falling from a rooftop”, suggesting that the recent stability could be short-term, with potential for further downside.
- US dollar index peaking could lead to a reversal in capital flows to emerging markets, which may impact India’s performance relative to countries like Brazil and Korea, which have seen stronger growth.
Investment Strategy Moving Forward
Sabharwal is optimistic about certain sectors despite the overall market uncertainty.
- He remains fully invested in capital goods, infrastructure, and select NBFCs.
- He pointed out specific stocks such as NCC, Ahluwalia Contracts, Jyothy Labs, Mahindra Financial, and L&T Finance as promising investment opportunities.
The upcoming Nifty reshuffle has raised questions about the inclusion of Zomato and Jio Financial, with experts like Sandip Sabharwal warning about potential distortions in market indicators. While the broader market shows signs of uncertainty, Sabharwal’s strategic focus on capital goods, infrastructure, and NBFCs offers a roadmap for navigating the market’s future dynamics. Investors will need to keep an eye on how these changes influence the market in the coming months.
