Nifty Pharma

What is NIFTY Pharma?

NIFTY Pharma is a sectoral index on the National Stock Exchange (NSE) that captures the pharmaceutical sector's performance in the Indian economy. It was initially constituted of only 10 stocks. However, since September 30, 2021, Pharma NIFTY comprises 20 tradable, exchange-listed pharmaceutical stocks.

The basic industries eligible to be included in the NIFTY Pharma index are the ones dealing with Biotechnology and Pharmaceuticals.

This NIFTY Pharma index was launched on July 1, 2005, with the base date as January 1, 2001, and the base value at 1000. The NIFTY Pharma share price since inception, has breached the levels of 12,000 at ~36 P/E multiples. It is reconstituted semi-annually in order to ensure that it continues to reflect the changing dynamics of the Indian healthcare industry.

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

NIFTY Pharma has a variant in the form of the NIFTY Pharma Total Returns Index.

Nifty Pharma Stocks Selection Criteria

The NIFTY Pharma 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.

The securities must fulfill the following eligibility criteria for inclusion:

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 20, 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 pharmaceutical sector.
5. Should have a trading frequency of at least 90% in the past six months.
6. Should have a listing history of at least six months.
7. Should preferably be traded on NSE’s F&O segment
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.

How is Nifty Pharma Value Calculated?

The index value is calculated as follows –

Index value = Current market capitalization/ (Base market capitalization * Base Index Value)

The NIFTY Pharma index is 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 Pharma (if any) is implemented from the last trading day of March and September after giving four weeks prior notice to the market.