Nifty Auto

What is NIFTY Auto?

NIFTY Auto is a sectoral index on the National Stock Exchange (NSE) that captures the automobile sector's performance in the Indian economy. It is a real-time index of 15 tradable, exchange-listed automobile stocks. The sectoral distribution of this index is limited to two components-Automobile and Auto Components at 91.33% weightage and Capital Goods with the remaining 8.67% weightage. 

The basic industries eligible to be included in the NIFTY Auto index are 2 & 3 wheelers, Auto Components & Equipments, Batteries – Automobile, Castings & Forgings, Commercial Vehicles, Fastener, Gas Cylinders, Passenger Cars & Utility Vehicles, Tractors, Trading - Auto Ancillaries, Trading – Automobiles, and Tyres & Rubber Products.

This NIFTY Auto index was launched on July 12, 2011, with the base date as January 1, 2004, and the base value at 1000. The NIFTY Auto share price since inception has breached the levels of 12000 at ~54 P/E multiples. It is reconstituted semi-annually in order to ensure that it continues to reflect the changing dynamics of the Indian automobile sector.

The NIFTY Auto index is owned and managed by NSE Indices Limited, previously known as India Index Services & Products Limited. The Auto index is governed by a three-tier structure that comprises the BOD of NSE Indices, the Index Advisory Committee and the Index Maintenance Sub-Committee.

NIFTY Auto has a variant in the form of the NIFTY Auto Total Returns Index. This index has practical applications for launching index funds, ETFs, and structured investment products, as well as for benchmarking fund portfolios.

Nifty Auto Stocks Selection Criteria

The NIFTY Auto share price is computed by weighting its 15 stocks on the basis of periodically capped free-float market capitalization relative to a base market capitalization value on a real-time basis. Free float refers to the shares which are not held by promoters and are readily available to the public for trading.

In order to be considered for inclusion in the NIFTY Auto index, the securities must fulfil the following eligibility criteria:

1. It should be listed on the National Stock Exchange.
2. Should form a part of NIFTY 500, unless the number of eligible stocks falls below 10, then in such cases, the deficit number of stocks shall be selected from the universe of top 800 ranked stocks based on both average daily turnover and average daily full market capitalization data of the previous six months.
3. Should be a part of the Automobiles sector.
4. Should have a trading frequency of at least 90% in the past six months.
5. Should have a listing history of at least six months.
6. A recently listed company (IPO) can be included if it meets the above eligibility criteria for a period of three months instead of six months.
7. Should adhere to the cap of 33% in case of a single stock and 62% for the top 3 stocks cumulatively at the time of rebalancing.

How is Nifty Auto Calculated?

The index value is calculated as follows –

Index value = Current market capitalization/ (Base market capitalization * Base Index Value)

The NIFTY Auto index is semi-annually based on six months of data, with the cutoff date being January 31 and July 31 of each year. The replacement of stocks in NIFTY Auto (if any) is implemented from the last trading day of March and September after giving four weeks prior notice to the market.