Why Nuix, Hub24 shares are on watch

A couple of software giants march into the index, forcing passive funds to buy into their shares. How will the prices go?

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asx share price on watch represented by investor looking through magnifying glass

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Just 3 months after listing, Nuix Ltd (ASX: NXL) will enter the S&P/ASX 200 Index (ASX: XJO).

After an initial public offering at $5.31 per share, the data analytics provider floated in early December and immediately became a market darling.

It rose as high as $11.86 in January. But it’s since sunk to $5.51 after investors savaged its half-yearly result.

But now that Nuix will join the elite 200 from 22 March, all eyes will be on the share price again. This is because index funds that follow the ASX 200 will be forced to buy into the stock, pushing demand upwards.

The same goes for Hub24 Ltd (ASX: HUB), which was also announced as a new entrant to the ASX 200 this month.

The Hub24 share price has had an up-and-down year but still sits slightly down year-to-date. No doubt the fintech is looking forward to a potential boost from index funds.

S&P Dow Jones Indices on Friday also announced 4 other companies would make it into the ASX 200 this month:

The ASX companies kicked out from the 200

If 6 companies enter the 200, then 6 must come out.

Unfortunately, these were the businesses that couldn’t grow quite enough to remain in the club:

The Bravura Solutions share price has tumbled almost 17% so far this year, and its demotion out of the ASX 200 will not help.

Fellow technology business Service Stream has suffered even more, taking a 33% haircut off its share price year-to-date. The Motley Fool reported last week it’s one of the most shorted stocks on the ASX.

The ASX 200 is a group of the 200 largest companies on the bourse. Membership is updated quarterly.

The above additions and removals will occur before market open on Monday 22 March.

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Returns as of 15th February 2021

Tony Yoo owns shares of Nuix Pty Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and Hub24 Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd, Hub24 Ltd, Nuix Pty Ltd, Service Stream Limited, and SMARTGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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