Nifty 50 valuation to rise after inclusion of Zomato, Jio Financial Services shares

The Nifty 50 index is set to witness an increase in its valuation in terms of price-to-earnings (P/E) ratio following the inclusion of Zomato and Jio Financial Services in the upcoming March rebalancing. These stocks will officially join the index on March 28, replacing Bharat Petroleum Corporation (BPCL) and Britannia Industries.

The shift marks a notable change in the composition of the Nifty 50, as high P/E, new-age tech-driven stocks replace traditional sectors like FMCG and oil & gas.

The current Nifty 50 P/E ratio stands at 19.9x, based on an estimated earnings per share (EPS) of ₹1,186 for FY26. However, according to Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research, post the rebalancing, the index is projected to trade at a P/E of 20.2x, with a revised EPS estimate of ₹1,171 for the same period.

For FY27, the Nifty 50’s P/E is expected to rise from 17.5x to 17.7x, with the EPS estimate adjusting from ₹1,349 to ₹1,335.

The addition of new-age, high P/E stocks such as Zomato and Jio Financial Services is a key driver behind this increase. These companies, which operate in technology-driven sectors, generally trade at premium valuations compared to traditional businesses such as BPCL and Britannia Industries.

Since 2018, the Nifty 50 index has witnessed a structural shift, with new-age stocks from sectors such as insurance, fintech, organized retail, consumer, and healthcare gaining entry, while traditional economy stocks from industries like oil & gas, industrials, and conventional banking have been phased out.

$900 Million in Passive Inflows Expected

The inclusion of Zomato and Jio Financial Services is set to trigger significant passive inflows, estimated at over $900 million., Zomato alone is expected to attract $602 million in inflows, while Jio Financial Services may see around $308 million, as per Nuvama estimates.

On the other hand, the exclusion of Britannia Industries and BPCL from the index is likely to result in outflows of $238 million and $225 million, respectively.

Changing Market Dynamics

The addition of new-age stocks in the Nifty 50 reflects the growing influence of technology-driven businesses in India’s equity markets. The increase in the index’s P/E ratio suggests that investors may need to account for changing valuation metrics, with a greater emphasis on growth-oriented stocks.

With the rebalancing set to take effect, market participants will closely monitor the impact of these changes on overall index performance and investor sentiment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.