Sensex is getting older, wiser — and a bit more defensive

Mint

26-05-2025

Effective 23 June, Sensex, the bellwether index of Asia's oldest exchange, will be sporting a few more grey hairs. A key reshuffle will see the exit of two long-standing constituents: IndusInd Bank, a private sector bank recently embroiled in governance challenges, including accounting discrepancies and suspected internal fraud, and Nestle India, the maker of popular Maggi noodles.
Incorporated in 1994 and 1959 respectively, these companies are making way for even older entrants: Trent (a Tata Group company) and Bharat Electronics, both founded before 1955.
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This half-yearly rebalancing will tip the index's age balance towards more mature companies.
Currently, about 30% of the 30-scrip index's companies are aged 54 years or above. After this reconstitution, that proportion will increase to one-third, according to a Mint analysis of data from CMIE. The share of mid-aged companies (40-53 years and 35-39 years) will remain stable at 20% and 10% respectively, while the youngest cohort--companies aged 34 years or below--will decline from 40% to 36.7%.
This upcoming reshuffle also marks seven companies exiting the Sensex over the past five years, highlighting the benchmark's dynamic nature. Only eight of the original 1986 constituents remain in the index today. A dramatic overhaul in 1996 saw half the stocks replaced, ushering in a new guard.
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A defensive debut
That's not all.
Adding to the Sensex's evolving composition, Bharat Electronics Ltd (BEL), a prominent defence public sector undertaking, is poised to join the index. This inclusion is notable as it marks the first time a company focused solely or predominantly on defence has entered the 30-share benchmark. While Bharat Forge, a past Sensex constituent (according to data sourced from CMIE), has defence among its businesses, only about 10% of its revenues came from defence in fiscal 2024, compared to BEL's core defence operations.
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The defence sector has recently rallied sharply, driven by increasing export growth and significant budget boosts. The current rally in defence stocks has been supported by investors anticipating greater government spending on military modernization, a response to prevailing geopolitical tensions between India and Pakistan.
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BEL's inclusion, therefore, is not merely an index rebalance but a reflection of India's strategic push towards self-reliance in defence and the sector's escalating importance in the nation's economic narrative.
That said, within the Sensex's sector weightage, financial services maintain their dominance. Technology firms, on the other hand, currently grappling with a slowdown, have seen their weightage (by free-float market capitalization) decline from 17.9% to 12.6% in nearly a decade, with the auto sector also losing prominence with its weightage down from 10.8% to 6.2%.