DLF shares fall after removal from BSE sensex

After the Bombay Stock Exchange decided to replace the India’s biggest real estate company, DLF in the India’s benchmark 30 share index with the pharmaceutical major company, Dr. Reddy’s Laboratories, it’s shares are said to have fallen by 2.5 percent. The company is said to have experience a big eroding in the sense that its market value has fallen by 84% to $6.4 billion as compared to the peak which was over $38.4 billion in early 2008. According to a company’s spokesperson, the replacement of DLF stock in BSE index is primarily due to low floating stocks, as DLF has high promoter group holding of 79 percent leading to comparatively low free float. This removal of DLF from the index which would take effect from June 11 , also raises another effects as it may result into problems such as declining profits among the real estate companies in India which are suffering with high debt, slow sales and thereby slow growth. According to an analyst at Ambit Capital, the real estate sector has faced a huge de-rating from investors in the share market as they as becoming skeptical about the transparency and accounting policies of the companies. After DLF exit from the BSE index there would be no real estate stock on the index.