Nifty PSE

What is NIFTY PSE?

NIFTY PSE is a thematic index on the National Stock Exchange (NSE) which captures the performance of the Indian public sector enterprises on a real-time basis. It is constituted of 20 stocks whose 51% share capital is owned by the central and/or state government, either directly or indirectly. The NIFTY PSE stocks span 7 sectors, including Oil, Gas & Consumable Fuels (42%), Power (30.71%), Capital Goods (10.03%), Metals & Mining (5.88%), Financial Services (4.88%), Services (3.37%), and Consumer Services (3.14%).

This NIFTY PSE index was launched with the base date of January 2, 1995, and the base value at 1000. The NIFTY PSE share price since inception, has breached the levels of 3,000 at ~5x P/E multiples. It is reconstituted semi-annually in order to ensure that it continues to reflect the changing dynamics of the Indian PSE industry.

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

Nifty PSE Stocks Selection Criteria

The NIFTY PSE 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.

To be included, a security 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 owned to the extent of 51% by the central and/or state government.
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 be a part of the PSE sector.
6. New securities will be included, if their float-adjusted market capitalization is at least 1.5 times the index’s smallest constituent’s free-float market capitalization.
7. Should have a trading frequency of at least 90% in the past six months.
8. Should have a listing history of at least six months.
9. 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.
10. 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 PSE Calculated?

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 PSE 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 PSE (if any) is effective from the last trading day of March and September after giving four weeks prior notice to the market.