Nifty CPSE

What is NIFTY CPSE?

NIFTY CPSE is a thematic index on the National Stock Exchange (NSE) which was launched in order to assist the government’s initiative of divesting its stake in selected central public sector enterprises (CPSEs). It was launched in the form of a CPSE ETF, which would be utilized for disinvestment. It is composed of 12 stocks that span 5 sectors, including Power, Oil, Gas & Consumable Fuels, Capital Goods, Metals & Mining, and Construction.

This NIFTY CPSE index was launched on March 18, 2014, with the base date as January 1, 2009, and the base value at 1000. The NIFTY CPSE share price, since inception has breached the levels of 2,000 at ~6x P/E multiples. The index is rebalanced quarterly to capping its index weights at 20% in order to ensure that it continues to reflect the changing dynamics of the Indian CPSE industry.

The NIFTY CPSE index is owned and managed by NSE Indices Limited, previously known as India Index Services & Products Limited. The CPSE 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.

How is NIFTY CPSE Calculated? How Are Stocks Selected for Inclusion in NIFTY CPSE?

The NIFTY CPSE share price is computed by weighting its 12 stocks on the basis of periodically capped free-float market capitalization relative to a base market capitalization value on a real-time basis.

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

1. Should be listed on the National Stock Exchange.
2. Should be included in the list of CPSEs that has been published by the Department of Public Enterprises.
3. Should be owned to the extent of 51% by the central and/or state government under the promoter category.
4. Should have average float-adjusted market capitalization of  >1,000crs for a 6-month period ending December 2019.
5. Companies compliant with IRDA’s dividend norms are eligible for inclusion.
6. CPSEs that were listed at NSE after January 1, 2004, were included in the index in the quarter that followed their listing.
7. Initially, the constituents’ weight was capped at 25%. However, the subsequent rebalancing of weights is done at 20% on a quarterly basis in the months of March, June, September, and December.

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 total return values of the NIFTY CPSE index are calculated daily. Index reviews will be undertaken in case of mergers, demergers, or any other corporate actions. Any revision in the index- inclusion, exclusion, caps, changes in eligibility- will be undertaken only after a formal request is made by the CPSE ETF issuer AMC, that has been appointed by the Ministry of Disinvestment.