Nifty Consumption

What is NIFTY India Consumption?

NIFTY India Consumption is a thematic index on the National Stock Exchange (NSE) which captures the performance of the domestic consumption sector on a real-time basis. It is constituted of 30 stocks that span 9 sectors: FMCG (35.9%), Automobile and Auto Components (20.06%), Consumer Durables (16.1%), Telecom (9.77%), Consumer Services (7.29%), Power (6.09%), Healthcare (2.22%), Textiles (1.4%), and Media, Entertainment & Publication (1.17%).

Some of the basic industries eligible for inclusion in the NIFTY Consumption index are 2/3 Wheelers, Air Conditioner, Airline, Amusement Parks, Breweries & Distilleries, Tobacco Products, Electronics, Cycles, Dairy Products, Digital Entertainment, E-Learning, Electric Utilities, Film Production, Distribution & Exhibition, Footwear, Home Furnishing, Garments & Apparels, Gems, Jewellery And Watches, Glass, Hospital, Hotels & Resorts, Internet & Catalogue Retail, Leather Products, Packaged Foods, Paints, Passenger Cars & Utility Vehicles, Pharmacy Retail, Plastic Products, Power, Print Media, Tea & Coffee, Wellness etc.  

This NIFTY Consumption index was launched on July 12, 2011, with the base date as January 2, 2006, and the base value at 1000. The NIFTY India Consumption share price since inception, has breached the levels of 7,000 at ~35x P/E multiples. It is reconstituted semi-annually and caps individual stocks at 10% weightage.

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

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

How is NIFTY India Consumption calculated? How are stocks selected for inclusion in NIFTY India Consumption?

The NIFTY India Consumption 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 need to fulfill the following criteria for eligibility:

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 consumption sector.
6. >50% of the company’s revenue should be earned domestically i.e., excluding export income.
7. 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.
8. Should have a trading frequency of at least 90% in the past six months.
9. Must have a listing history of minimum six months.
10. 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.
11. Should adhere to the cap of 10% in case of a single stock at the time of rebalancing.

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 India Consumption 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 Consumption (if any) is effective from the last trading day of March and September.