The benchmark Nifty50 index is poised to get its first new-age economy stock with over 100 times price-to-earnings ratio as Info Edge will be the first pure-play internet platform company to do so, as and when it qualifies.
Based on data till July 19, 2021, the upcoming semi-annual Nifty50 reshuffle could result in Info Edge being the closest contender to replace state-run Indian Oil Corporation on September 28, 2021, according to ICICI Securities.
The brokerage firm also believes that new large-cap internet platform companies like Zomato with high free-float market cap due to zero promoter holdings could be serious contenders for entry into the benchmark indices going ahead.
"However, Info Edge is marginally behind in terms of average free-float market capitalisation criteria at $5 billion and 3.7 percent lower than 1.5x that of IOCL – the smallest free-float market cap stock within the current Nifty50 index, while fulfilling other conditions such as inclusion in the F&O list and being part of the upcoming proforma NSE100 universe amongst others," ICICI Securities said in a report.
Meanwhile, the US Dow Jones Industrial Average still doesn’t have any of the internet platform companies such as Amazon or Google as part of its constituents given the limitations of it being a price-weighted index.
In the upcoming proforma NSE100 universe list, which will be based on the average free-float market cap since February 2021 till now, two other non-Nifty50 index stocks that rank ahead of Info-edge are Avenue Supermarts and Adani Green Energy.
However, as both these stocks are not part of the F&O list currently, they may not be included in the index in the September review.
All the three stocks are notably from the new-age economy sectors of internet businesses, organised discount grocery retail with e-commerce incubation, and a green energy company, respectively
Also, all these three companies have a 1-year forward P/E ratio of >100x, thereby inflating the NSE 100 P/E ratio as compared to the Nifty50. Nifty50’s exclusion and inclusion trends reflect the emerging pockets of demand in the economy over the long term, ICICI Securities said.
First Published: IST