Impact on Stock Price by the Inclusion to and Exclusion from CNX Nifty Index

Changes in an index are a regular phenomenon and they take place due to the inclusion and exclusion of stocks from the index. The inclusion or exclusion of stocks creates great impact on the value of the firm. However, these changes are simply a short-lived event with no permanent valuation effect. The present research study analyzed the impact of the inclusion into and exclusion of certain stocks from National Stock Exchange (NSE) S&P CNX Nifty index with Indian perspective. The study provides evidence on whether the announcements of Nifty index maintenance committee have any information content. This will also demonstrate the efficiency of Indian stock market with particular reference to NSE. The study revealed that on an average, no permanent effects were observed on stock prices. It is also found from the study that the NSE reacted unfavourably to the inclusion and exclusion of stocks and it is impossible to earn any excess returns where the particular stocks are included or excluded from the index.