Different Types of NSE Sectoral Indices

Different Types of NSE Sectoral Indices

A benchmark index of the NSE, the NIFTY 50, consists of the 50 most liquid equity stocks. There are 15 major sectoral indices on the NSE. Sectors such as information technology, consumer goods, entertainment, media, financial services, metals, pharmaceuticals, telecommunications, cement, automobiles, pesticides and fertilisers, energy, and so on. Furthermore, sectoral NIFTY indices require companies to meet certain criteria in order to be included. To understand sectoral indices on the NSE and the criteria companies must meet, read this article.
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  • 18 Oct 2023

Key Highlights

  • Sectoral indices provide benchmarking data for specific sectors within a market. Sectoral indices can help measure the performance of sectors like energy, healthcare, automobiles, consumer products, technology & communications, and financials.
  • Types of NSE Sectoral Indices include - NIFTY Auto, NIFTY Bank, NIFTY Financial Services, NIFTY FMCG, NIFTY Healthcare, NIFTY IT, NIFTY Media, NIFTY Metal, NIFTY Pharma, NIFTY Private Bank, NIFTY PSU Bank, NIFTY Realty, NIFTY Consumer Durable, and NIFTY Oil and Gas.
  • To be eligible for inclusion in NIFTY sectoral indices, companies must meet specific criteria, including being a member of NIFTY 500, having a minimum of 10 stocks, and maintaining a certain level of market capitalization.

A sectoral index provides benchmarking data for specific sectors within a market. Energy, healthcare, automobiles, consumer products, technology and communications, and financial sectors are some of the sectors identified as being appropriate for sectoral indices. Taking Bank NIFTY as an example, it represents the overall performance of the Indian banking sector in the NSE's sectoral index. Furthermore, a sectoral index is reviewed every January and July.

There are two main types of indices in the Indian stock market: BSE Sensex and the NSE Nifty. Let’s explore how many types of nifty are there. Below is a table explaining the major sectors of the NSE share market.

Sectoral Index Sector No. Of Constituents Description Tradeable/Non tradable
NIFTY AutoAutomobile15Manufacturers of cars, motorcycles, heavy vehicles, tyres, and auto accessoriesNon-Tradable
NIFTY BankLiquid and Large Banks of India12Determines the benchmarks that help investors and market intermediaries assess Indian banks' capital market performanceTradable
NIFTY Financial ServicesFinancial Industries20Financial institutions, housing finance companies, insurance companies, and other companies providing financial servicesTradable
NIFTY Financial Services 25/50Financial Industries (all stocks that are part of NIFTY Financial Services will always be included in this index)20The weight of each stock should not exceed 25% The average weight of all stocks whose individual weights are 5% should not exceed 50%Tradable
NIFTY FMCGFast Moving goods15Non-durable, highly consumed, off-the-shelf goodsNon-tradable
NIFTY HealthcareHealthcare Companies20Healthcare and macroeconomics should be integrated in stocksNon-tradable
NIFTY ITIndian IT companies10Companies should be involved in IT infrastructure, IT education, software training, networks, software development, hardware, IT support & maintenanceDiscontinued by NSE
NIFTY MediaMedia & Entertainment10Publishing, media, and entertainment industries are included in it.Non-tradable
NIFTY MetalMetal Sector15Sectors such as metals and mining are includedNon-tradable
NIFTY PharmaPharmaceutical Sector20Pharma companies that manufacture pharmaceuticalsNon-tradable
NIFTY Private BankPrivate Sector Banks10There should be a minimum of 90% trading frequency by the bank in the past six monthsTradable
NIFTY PSU BankPublic Sector Banks13A bank that is listed, traded, or not listed but permitted to trade at the NSE is eligible for inclusion in the index.Tradable
NIFTY RealtyReal Estate Companies10Mostly engaged in residential and commercial constructionNon-tradable
NIFTY Consumer DurableConsumer Durables Industry15Furniture, consumer electronics, housewares, and other manufacturersNon-tradable
NIFTY Oil and GasOil, Gas, and Petroleum Industry15The companies that manufacture and extract oil, gas, and petrolNon-tradable

For NIFTY sectoral indices, the following companies are eligible:

  • The company should be a member of NIFTY 500 when purchasing ETFs or Index Mutual Funds.
  • The index should contain a minimum of 10 stocks.
  • If the number of eligible stocks from NIFTY 500 falls below 10, then the remaining stocks will be taken from the top 800 stocks. NIFTY 500 index rebalancing will be based on the average daily turnover and average daily full market capitalisation of the previous 6 months.
  • After arranging the companies in descending order, the final selection will be based on their free-float market capitalisation.

By purchasing Exchange-Traded funds (ETFs) or Index Mutual Funds, you can invest in any sectoral index. Furthermore, it is important to consider the prospects of a particular sector when making an investment decision.

Conclusion

As a result of the segmentation of markets into sectors, investors have the ability to perform detailed analyses of the economy and understand how particular sectors are performing. Furthermore, it assists in setting up benchmarks for specific sectors or industries. With index funds or exchange-traded funds that track these indices, investors can gain exposure to a wide range of stocks and potentially achieve better returns with less risk. When trading stocks for the first time, it is wise to seek expert guidance from a company like Kotak Securities.

FAQs on Different Types of NSE Sectoral Indices

The Sensex and Nifty are two popular Indian market indices.

The NIFTY 50 index consists of 13 sectors of the Indian economy and provides investment managers with exposure to the Indian market.

Inflation, interest rates, and the broader economic environment affect the Nifty 50's performance. Moreover, the index can be impacted significantly by unexpected macro events in the short term.

Based on NSE's free-float market capitalisation, the top 50 large-cap companies are selected. A company's free-float market cap is calculated by multiplying its stock price by the number of shares available on the market.

Thematic indices are another way the NSE measures a company's performance in relation to a specific theme.

There are 15 major sectoral indices on the NSE.

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