Nifty Commodities Index

What are NIFTY Commodities?

NIFTY Commodities is a thematic index on the National Stock Exchange (NSE) which captures the performance of the commodities sector in the Indian economy on a real-time basis. It is constituted of 30 stocks that span 5 sectors: Oil, Gas & Consumable Fuels (26.64%), Metals & Mining (22.5%), Construction Materials (19.48%), Power (16.25%), and Chemicals (15.13%). 

The basic industries eligible for inclusion in the NIFTY Commodities index are Aluminium, Copper & Zinc Products, Cement & Cement Products, Carbon Black, Coal, Commodity Chemicals, Electric Utilities, Ferro & Silica Manganese, Iron & Steel, Fertilisers, Industrial Minerals, Jute & Jute Products, Oil E&P, Paper & Paper Products, Pesticides & Agrochemicals, Pig Iron, Refineries & Marketing, Specialty Chemicals, Sponge Iron, and Sugar.

This NIFTY Commodities index was launched on September 7, 2011, with the base date as January 1, 2004, and the base value at 1000. The NIFTY Commodities share price since inception, has breached the levels of 5,000 at ~7x P/E multiples. It is reconstituted semi-annually and caps individual stocks at 10% weightage.

The NIFTY Commodities index is owned and managed by NSE Indices Limited, previously known as India Index Services & Products Limited. The Commodities index is governed by a three-tier structure comprising:

• BOD of NSE Indices: responsible for managing the index as per a detailed framework.
• Index Advisory Committee (Equity): responsible for providing guidance on macro issues related to the index.
• Index Maintenance Sub-Committee: responsible for the maintenance of the index’s methodology and stock selection criteria.

NIFTY Commodities has a variant in the form of the NIFTY Commodities Total Returns Index. This index is ideal for benchmarking fund portfolios and for launching ETFs, index funds, and other structured investment products.

Nifty Commodities Stocks Selection Criteria

The NIFTY Commodities share price is computed by weighting its 30 stocks on the basis of periodically capped free-float market capitalization relative to a base market capitalization value on a real-time basis. 

The securities should fulfill the following eligibility criteria:

1. Should be listed on the National Stock Exchange.
2. Should form a part of NIFTY 500.
3. Should have a minimum of 10 stocks.
4. If 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 from NIFTY 500’s universe.
5. Should be a part of the commodities sector.
6. New securities will be included, if their float-adjusted market capitalization is at least 1.5 times of the index’s smallest constituent’s free-float market capitalization.
7. Should have a trading frequency of at least 90% in the past six months.
8. Should have a listing history of at least six months.
9. 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.
10. Should adhere to the cap of 10% in case of a single stock at the time of rebalancing.

How is Nifty Commodities Value Calculated?

The index value is calculated as follows – 

    Index Value = Current Index Market Capitalization/ (Base Free Float Market Capitalization * Base Index Value)

Where,

Current Index Market Capitalization = Shares o/s * IWF * Capping factor * Price 

IWF (Investible Weight Factors) = 1 as it is based on market capitalization method 

The NIFTY Commodities index is rebalanced 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 Commodities (if any) is effective from the last trading day of March and September after giving four weeks prior notice to the market.