Oldest Sensex stock Tata Motors faces risk of exit after demerger

Tata Motors, one of the Sensex’s original constituents, faces the risk of being dropped from the 30-share benchmark next month, following a sharp decline in its market capitalisation after the demerger of its commercial vehicles business in October.

The stock is likely to be replaced by InterGlobe Aviation (IndiGo), the country’s largest airline, which is currently the highest-ranked non-constituent by market value.

Post-split, Tata Motors (commercial vehicles) is valued at ₹1.18 trillion, while Tata Motors Passenger Vehicles commands a market capitalisation of ₹1.38 trillion. IndiGo, by contrast, stands significantly higher at ₹2.27 trillion.

The December review is expected to be announced later this month, with changes taking effect from the close of trade on December 19.

According to an analysis by Brian Freitas of Periscope Analytics, published on Smartkarma, Tata Motors could see passive outflows of about ₹2,232 crore if it is removed from the index, while IndiGo may witness inflows of around ₹3,157 crore. Freitas adds that Grasim Industries also has an outside chance of inclusion if the index committee chooses to bolster the commodities sector, which is currently under-represented. If added, Grasim will see passive inflows of ₹2,526 crore.

The Sensex—first introduced on January 1, 1986, with a base value of 100 back-dated to 1976—is widely regarded as a barometer of the Indian economy and equity markets. Of the original 30 stocks, only three—Reliance Industries, Hindustan Unilever and ITC—have remained consistently in the index. Other original constituents such as Larsen & Toubro, Tata Steel, Tata Motors and Mahindra & Mahindra continue to be part of the Sensex today, although each was temporarily excluded at various points in time.

If removed in the upcoming review, Tata Motors would follow Nestlé, another original-list stock that was dropped during the June rebalancing.

Among current constituents, Infosys and State Bank of India (SBI) are among the longest-serving names, although they were added after the index’s inception.