Infosys will be in buzz over the coming days

Recently, the Security and Exchange Board of India (SEBI) expressed that the existing promoters may be reclassified as public if a company becomes professionally managed and does not have any identifiable promoter. This change in definition could increase the weightage of Infosys in Nifty, Sensex and MSCI Indices and could surpass the weightage of HDFC in these indices. Hence Infosys could be the most influential stock on these indices in coming few days. The extent of public shareholding decides the weightages of stocks in benchmark indices.

Once SEBI proposal will finalise, the estimation for Infosys weightage in Nifty could increase to about 7.4 per cent from 5.7 per cent. In Sensex, it would rise to around 9.2 per cent from 7.2 per cent. In MSCI index, Infosys weightage would be around 11.1 per cent as against the earlier 9.7 per cent. The market experts are of the opinion that the increase in weightage could boost Infosys stock price in the days ahead. Currently, the free float of Infosys is around 84 per cent.

As the funds will adjust the portfolios, the stock price could increase around 3-5 per cent. Over the last one year Infosys has outperformed in the market, the stock moved up by 24 per cent. If compared with the rivals the TCS stock moved up by 14 per cent and Wipro stock increased by 5 per cent over the same period.

As per current shareholding pattern of Infosys, the promoter holdings is 13.08 per cent, FII holdings are 38 per cent and DII are 15 per cent. In October last year, the erstwhile promoters and founders, N.R. Narayana Murthy, Nandan Nilekani, S. Gopalakrishnan, S.D. Shibulal and K. Dinesh clearly expressed their wish that their shareholding was not to reflect under promoter’s category and should be categorized under public holdings as none of them are any longer associated with the company.

The reclassification of the Infosys promoter shareholding as public shareholding can be positive for the stock price. The share price of the company is definitely expected to surge as the exchange traded funds and other portfolio managers are expected to buy this stock to realign their portfolios to increase the the Infosys weightage in the benchmark indices over the coming period of time. However one should follow SEBI's approval for the changes in the definition of promoter's holdings in the days ahead.