Different Types of NSE Sectoral Indices

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  • 18 Oct 2023
Different Types of NSE Sectoral Indices

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 Auto
Automobile
15
Manufacturers of cars, motorcycles, heavy vehicles, tyres, and auto accessories
Non-Tradable
NIFTY Bank
Liquid and Large Banks of India
12
Determines the benchmarks that help investors and market intermediaries assess Indian banks' capital market performance
Tradable
NIFTY Financial Services
Financial Industries
20
Financial institutions, housing finance companies, insurance companies, and other companies providing financial services
Tradable
NIFTY Financial Services 25/50
Financial Industries (all stocks that are part of NIFTY Financial Services will always be included in this index)
20
The 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 FMCG
Fast Moving goods
15
Non-durable, highly consumed, off-the-shelf goods
Non-tradable
NIFTY Healthcare
Healthcare Companies
20
Healthcare and macroeconomics should be integrated in stocks
Non-tradable
NIFTY IT
Indian IT companies
10
Companies should be involved in IT infrastructure, IT education, software training, networks, software development, hardware, IT support & maintenance
Discontinued by NSE
NIFTY Media
Media & Entertainment
10
Publishing, media, and entertainment industries are included in it.
Non-tradable
NIFTY Metal
Metal Sector
15
Sectors such as metals and mining are included
Non-tradable
NIFTY Pharma
Pharmaceutical Sector
20
Pharma companies that manufacture pharmaceuticals
Non-tradable
NIFTY Private Bank
Private Sector Banks
10
There should be a minimum of 90% trading frequency by the bank in the past six months
Tradable
NIFTY PSU Bank
Public Sector Banks
13
A bank that is listed, traded, or not listed but permitted to trade at the NSE is eligible for inclusion in the index.
Tradable
NIFTY Realty
Real Estate Companies
10
Mostly engaged in residential and commercial construction
Non-tradable
NIFTY Consumer Durable
Consumer Durables Industry
15
Furniture, consumer electronics, housewares, and other manufacturers
Non-tradable
NIFTY Oil and Gas
Oil, Gas, and Petroleum Industry
15
The companies that manufacture and extract oil, gas, and petrol
Non-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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