Nifty Oil & Gas

What is NIFTY Oil & Gas?

NIFTY Oil & Gas is a sectoral index on the National Stock Exchange (NSE) which captures the behavior and performance of the Indian petroleum industry on a real-time basis. It is constituted of 15 stocks that are listed on NSE and are involved in the various businesses related to oil, gas and petroleum products.

The basic industries eligible for inclusion in the NIFTY Oil & Gas index are Gas Transmission/Marketing, Industrial Gas, LPG/CNG/PNG/LNG Supplier, Lubricants, Offshore Support Solution Drilling, Oil Equipment & Services, Oil Exploration & Production, Oil Storage & Transportation, Refineries & Marketing, and Trading – Gas.

This NIFTY Oil & Gas index was launched on January 15, 2020, with the base date as April 1, 2005, and the base value at 1000. The NIFTY Oil & Gas share price since inception, has breached the levels of 7,500 at ~8x P/E multiples. It is reconstituted semi-annually and caps individual stocks at 33% weightage.

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

How is NIFTY Oil & Gas calculated? How are stocks selected for inclusion in NIFTY Oil & Gas?

The NIFTY Oil & Gas share price is computed by weighting its 15 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 Oil & Gas 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 oil, gas & petroleum industry.
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 have a trading frequency of at least 90% in the past six months.
6. Must have a listing history of at least six months.
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. 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 33% in case of a single stock and 62% for the top 3 stocks cumulatively 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)

The NIFTY Oil & Gas 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 Oil & Gas (if any) is effective from the last trading day of March and September.