NCDEX Launches NDEX, FINNDEX to Expand Beyond Agricultural Commodities

NCDEX has launched two equity indices, NDEX and FINNDEX, as the exchange prepares to enter the equity and equity derivatives markets, as per news reports.  

This follows its expansion into mutual fund transaction services and marks a shift beyond its traditional agricultural commodities business. 

What NDEX and FINNDEX Track? 

NDEX comprises 20 large and liquid Indian equities selected from the top 60 companies listed on the National Stock Exchange (NSE). FINNDEX tracks 15 financial sector stocks chosen from the top 40 eligible companies, excluding insurance companies. 

FINNDEX includes companies across banking, non-banking financial companies (NBFCs), capital markets, and fintech. NDEX, meanwhile, covers companies across sectors and is designed to track large and liquid Indian equities. 

Stock Selection and Weightage 

Both indices use four parameters to select constituents: free-float market capitalisation and average daily traded value, each with a 30% weightage, and beta and volatility, each accounting for 20%. These factors are used to assess company size, trading activity, and sensitivity to market movements. 

The final weight of each stock combines its free-float market capitalisation weight and composite-score weight, with equal importance given to both. No single stock can account for more than 15% of either index at a rebalancing. 

The indices will be reviewed twice a year, in March and September. Changes outside the regular review cycle are permitted under specified circumstances. Both indices use January 2010 as their base month and have a base value of 10,000. 

NSE Indices Ltd will calculate and maintain the indices. Their values will be available in real time during market hours through NCDEX’s data feeds, websites, and periodic factsheets. 

Expansion into Equity Markets 

NCDEX managing director and chief executive officer Vikas Goel said the launch marked a step in the exchange’s transition into a multi-segment exchange. Tojo Banerjee, chief of equity business, said the indices consider factors beyond market capitalisation. 

NCDEX’s equity segment is expected to receive final approval from the Securities and Exchange Board of India (SEBI) in January.  

According to sources, the exchange may introduce derivatives on NDEX and FINNDEX in the second half of the next financial year, subject to SEBI approval. 

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Conclusion 

NCDEX has introduced the two indices ahead of its planned equity market entry. The proposed derivatives launch remains subject to regulatory approval. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.