Nifty Healthcare Index

What is NIFTY Healthcare?

NIFTY Healthcare is a sectoral index on the National Stock Exchange (NSE) which captures the performance of the healthcare sector in the Indian economy on a real-time basis. It is constituted of 20 stocks that are listed on NSE and are involved with the health and wellness industry.

The basic industries eligible for inclusion in the NIFTY Healthcare index are Biotechnology, Healthcare Research, Analytics & Technology, Healthcare Service Provider, Hospital, Medical Equipment & Supplies, Pharmaceuticals, and Pharmacy Retail.

This NIFTY Healthcare index was launched on November 18, 2020, with the base date as April 1, 2005, and the base value at 1000. The NIFTY Healthcare share price since inception, has breached the levels of 7,000 at ~36x P/E multiples. It is reconstituted semi-annually and caps individual stocks at 33% weightage.

The NIFTY Healthcare index is owned and managed by NSE Indices Limited, previously known as India Index Services & Products Limited. The NSE Healthcare 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 Healthcare has a variant in the form of the NIFTY Healthcare Total Returns Index. This index is ideal for benchmarking fund portfolios by AMCs. It can also be used for launching index funds, ETFs, and other structured investment products. 

How is NIFTY Healthcare calculated? How are stocks selected for inclusion in NIFTY Healthcare?

The NIFTY Healthcare share price is computed by weighting its 20 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 inclusion in the NIFTY Healthcare index, the securities must fulfill the following eligibility criteria:

1. Should be listed on the National Stock Exchange.
2. Should form a part of NIFTY 500.
3. Should be a part of the healthcare sector.
4. Should rank in top 20 stocks on the basis of average float-adjusted market capitalization on NSE’s F&O segment.
5. If the number of eligible stocks falls below 20, then in such cases, the deficit number of stocks shall be selected based on average free float market capitalization data of the previous six months from NIFTY 500’s constituents.
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 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 based on free-float market capitalization. These caps will be realigned on a quarterly basis in the months of March, June, September, and December.
8. NIFTY Healthcare index will be screened for compliance with SEBI’s norms on portfolio concentration for ETFs/ Index Funds on a quarterly basis.

The index value is calculated as follows – 

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

The NIFTY Healthcare 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 Healthcare (if any) is effective from the last trading day of March and September. Additional ad-hoc reconstitution may be undertaken in instances of delisting, suspension or scheme of arrangement.