Nifty Infrastructure

What is NIFTY Infrastructure?

NIFTY Infrastructure is a thematic index on the National Stock Exchange (NSE) which captures the performance of the infra sector in the Indian economy on a real-time basis. It is constituted of 30 stocks that belong to the industries of Power, Telecom, Roads, Railways, Shipping, Air, and other Utility Service providers. 

The basic industries eligible for inclusion in the NIFTY Infra index are Airline, Amusement Parks/ Other Recreation, Cement & Cement Products, Civil Construction, Compressors & Pumps, Commercial & Construction Vehicles, Electric Utilities, EDC, Gas Transmission, Heavy Electrical Equipment, Hospital, Hotels & Resorts, Industrial Equipments, Logistics Solution Provider, LPG/CNG/PNG/LNG Supplier, Lubricants, Offshore Support Solution Drilling, Oil E&P, Port & Port services, Power – Transmission, Railway Wagons, Refineries, Residential & Commercial Projects, Ship Building, Telecom etc.

This NIFTY Infrastructure index was launched on August 7, 2007, with the base date as January 1, 2004, and the base value at 1000. The NIFTY Infrastructure share price since inception, has breached the levels of 4,000 at ~14x P/E multiples. It is reconstituted semi-annually and caps individual stocks at 20%.

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

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

The NIFTY Infrastructure 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 index is subdivided into 11 sectors: Oil, Gas & Consumable Fuels, Construction, Construction Materials, Telecom, Power, Services, Capital Goods, Healthcare, Realty, Automobiles, and Consumer Services.

The securities have to fulfill the following eligibility criteria:

1. Should be listed on the National Stock Exchange.
2. Should form a part of NIFTY 500.
3. 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.
4. Should be a part of the infrastructure sector.
5. Should be tradeable in the F&O segment of NSE.
6. Should have a trading frequency of at least 90% in the past six months.
7. Should have a listing history of at least six months.
8. 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.
9. Should adhere to the cap of 20% weightage for a single stock at the time of rebalancing- the cap was 34% at the initial launch.
10. 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.

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