In a nutshell, insurance is likely to be the big theme in the revamped Nifty. The latest shift in the Nifty index will introduce insurance companies for the first time into the indices making them more reflective and also improve quality of Nifty earnings. This also brings into the index a fast growing sector that was recently listed and hence not represented at all.

Insurance companies were listed on Indian bourses just about 3 years back. We had a mix of life and non-life insurance companies listed today although the focus has been largely on the life companies. Today there are over six insurance companies that are listed and actively traded on the stock exchanges, both the BSE and the NSE.

The first shift pertains to the entry of HDFC Life, which will find a place in the Nifty index in place of Vedanta. The exit of Vedanta was inevitable. Vedanta Resources plans to delist its Indian subsidiary and the proposal has already been approved by 67% of the shareholders. The only option left for Vedanta, therefore, was to delisting the stock from the exchanges.

In another interest shift, SBI Life will replace Zee Entertainment in the Nifty. Zee had been an underperformer and had been in the news for the wrong reasons including a recent default by its group companies. SBI Life has emerged as one of the largest insurance players in India outside of LIC and this move will give a decent representation to insurance in Nifty.