Sectoral indices provide concise summaries and comparative data for specific sectors or industries. It enables investors to monitor a stock’s performance against specific sectors. Each trading company operates within a particular economic sector, and businesses that share common products or services will be grouped. By classifying firms and the economy, investors may conduct in-depth analyses of how the economy as a whole is operating. Energy, services, healthcare, consumer products, industrial, materials, utilities, technology & communications, and financial are all examples of sector indexes.
Sectoral Indices of the NIFTY
The NSE has established a variety of sectoral indices that reflect the performance of the equities included in each index. All sectoral indices are capped following the information provided under ‘Index features.’
- NIFTY Auto: The index is intended to reflect the behaviour and performance of the Automobiles sector, which include manufacturers of automobiles and motorcycles, as well as heavy vehicles, auto ancillaries, and tyres. The index comprises a maximum of 15 equities and has a January 1, 2004 base date.
- NIFTY Bank: The index is intended to capture the behaviour and performance of large, liquid banks. The index may contain up to 12 stocks and has a base date of January 1, 2000.
- NIFTY Consumer Durables: The index is designed to track the performance of companies in the Consumer Durables sector. The index consists of a maximum of 15 stocks and has a base value of 1000 points. The index’s base date is April 1, 2005.
- NIFTY FMCG: The index is intended to reflect the performance and behaviour of Fast-Moving Consumer Goods (FMCG). They are commodities and products that are not durable, are intended for mass consumption, and are readily available off the shelf. The index includes a maximum of fifteen companies.
- NIFTY IT: The index is intended to reflect the behaviour of companies involved in information technology infrastructure, information technology education and software training, networking infrastructure, software development, hardware, and information technology support and maintenance, among other activities. The index included twenty companies. The index’s base value was changed from 1000 to 100 on May 28, 2004.
- NIFTY Media: The NIFTY Media Index is designed to track the behaviour and performance of companies in industries such as media, entertainment, printing, and publishing. The index includes a maximum of fifteen companies.
- NIFTY Metal: The NIFTY Metal Index is intended to reflect the metals sector’s behaviour and performance, including mining. The index may have up to fifteen stocks. NIFTY Indices – October 2021 Methodology Document 20211012 27
- NIFTY Oil & Gas: The index is designed to track the performance of companies involved in the oil, gas, and petroleum industries. The index consists of a maximum of 15 stocks and has a base value of 1000 points. The index’s base date is April 1, 2005.
- NIFTY Pharma: The NIFTY Pharma Index is intended to reflect the behaviour and performance of pharmaceutical manufacturers. The index consists of a maximum of 20 stocks as of September 30, 2021.
- The NIFTY PSU Bank Index: was created to reflect the behaviour and performance of public sector banks. Effective December 27, 2019, all Public Sector Banks traded on the National Stock Exchange (NSE) (listed and traded or not listed but permitted to trade) are eligible for inclusion in the index, subject to meeting other inclusion requirements, including listing history and trading frequency. The index’s base date is January 1, 2004, and its base value is 1000 points.
- The NIFTY Private Bank Index: is intended to reflect the behaviour and performance of private sector banks. The index consists of ten stocks, and each company’s weight in the index is limited to 25%. (until March 29, 2019).
- NIFTY Realty: The NIFTY Realty Index is intended to reflect the behaviour and performance of enterprises engaged in developing residential and commercial real estate. The index may contain up to ten stocks.
- NIFTY Financial Services:The index is aimed to reflect the behaviour and performance of the Indian financial industry, including banks, financial institutions, housing finance, non-bank financial companies (NBFCs), insurance, and other financial services firms. The index is limited to a maximum of twenty stocks.
- NIFTY Financial Services 25/50: This is a new capped version of the NIFTY Financial Services index, with 25 denoting the maximum percentage weight of a single stock and 50 denoting the maximum percent weight of all stocks with an individual weight greater than 5%.
- NIFTY Healthcare: The index is intended to reflect healthcare companies’ behaviour and performance. The index has a maximum of twenty firms and has a base value of 1000 points, and the index’s base date is April 1, 2005.
Index Frequency of Review
Semi-annually, sectoral indices are reviewed using six-month data during January and July.
Criteria for Eligibility
Companies must be a part of a qualified sector universe to qualify for inclusion in the NIFTY sectoral indices. The universe is comprised of the following:
– At the time of review, companies should be a component of the NIFTY 500.
– When reconstituting child indices, the most recent index composition, including any modifications to the relevant parent index that have been disclosed or are still to be announced, shall be considered. Child indices are defined as indices whose constituents are drawn from a list of constituents from another index. NIFTY Auto, for example, would be called a child index because its constituents are drawn from the NIFTY 500 index.
– The index should have a minimum of ten stocks.
– If the number of eligible stocks within the Nifty 500 falls below 10, a deficit number of stocks shall be chosen from the universe of stocks ranked within the top 800 basis both, avg daily turnover and average daily full market capitalisation over the preceding six months period data used for index rebalancing of the Nifty 500.
– Businesses must be a part of their relevant industry universes.
– The companies are ranked according to their Free-Float Market Capitalisation (FF MCap). The ultimate selection of companies for inclusion in the index will be made using the FF MCap. NIFTY Indices – Methodology Document, October 2021 20211012 29
– Businesses will be included if their free-float market value is 1.5 times that of the smallest index constituent in the corresponding index.