In an excerpt from its weekly report for the trading week ended March 22, 2018, the Nigerian Stock Exchange (NSE) disclosed that it had concluded the biannual review of its various indices. The exchange had rebalanced the index in January this year.
Some stocks would be exiting the various indices, while some would be entering.
Here are lists of likely stocks that would be entering and exiting the various indices. This list, however, is subject to further amendment by the Exchange.
NSE 30 index
The NSE 30 index is made up of the 30 biggest stocks by market capitalization.
Diamond Bank Plc, Julius Berger Nig Plc, Forte Oil Plc, Dangote Flour Mills Plc, and Transcorp Plc are stocks that will exit the index.
FCMB Group Plc, Oando Plc, Beta Glass Co. Plc, UACN Plc, and Sterling Bank Plc are the stocks that could be entering the index.
NSE Consumer Goods Index
Northern Nigeria Flour Mills Plc and Vitafoam Nigeria Plc are likely stocks that will exit the index.
Union Dicon Salt Plc, DN Tyre & Rubber Plc are the stocks that could be entering the index.
NSE Banking Index
Wema Bank Plc and Diamond Bank Plc are the stocks likely to exit the index.
Jaiz Bank and Skye Bank are the stocks that could be entering the index.
NSE Insurance Index
Cornerstone Insurance Plc, STACO Insurance Plc, Standard Alliance Insurance Plc, and Equity Assurance Plc are likely to exit this index.
Consolidated Hallmark Insurance Plc, Sovereign Trust Insurance Plc, Veritas Kapital Assurance Plc, and Regency Alliance Insurance Plc could be entering the index.
NSE Industrial index
Stocks exiting are Portland Paints & Products Nig Plc, and DN Meyer Plc.
Grief Nigeria Plc and Austin Laz & Co. Plc are likely stocks to enter the index.
NSE Oil and Gas Index
Japaul Oil & Maritime Services Plc, and Eterna Plc are the stocks likely to join the index.
Conoil Plc, MRS Oil Nigeria Plc are most likely to exit the index.
NSE Lotus Islamic Index
Nigerian Aviation Handling Co. Plc, Jaiz Bank Plc, and Seplat Petroleum Development Co are likely stocks to join the index.
Lafarge Africa Plc, GlaxoSmithKline Nigeria Plc, and Total Nigeria Plc are those likely to be cut off.
Why does this matter?
For retail investors who do not trade often, the rebalancing may have little effect.
Asset managers such as Pension Fund Administrators (PFAs) and mutual funds tend to keep their portfolios in line with these indices.
For traders, the rebalancing means that the stocks exiting the indices could witness far less trading.
While the Exchange has not fixed a specific date when this would happen, it usually occurs in the first week of July. A telltale sign is significant trades occurring with many of them being in identical orders.
Market capitalization, which is the total worth of a particular stock, and liquidity are the primary criteria for the entry and exit of a stock into the indices. This in no way means that the stock has positive fundamentals.