BSE has excluded Hero Honda from the BSE sensex and have added Mahindra & Mahindra. There are many more changes taking place in the sectoral indices effective July 9, 2007. Other indices like BSE 500 were altered effective July 4, 2007.
There are some fears expressed by the market participants saying that Hero Honda may see selling pressure and M&M will experience buying. This is predominantly by those who actively track the BSE indices like the HDFC mutual fund’s BSE sensex fund. Also some other changes may take place for those who typically look at BSE 100 as an underlying benchmark.
However we do not see any major volatility in the prices due to indices restructuring, as there are very few who track BSE indices for trading. NSE Nifty however is a key underlying for derivative business and any restructuring in it should be seen with utmost care.
We do not see any need as such to act just because of the BSE indices restructuring.
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