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4 New Indices Launched by NSE - Everything You Need to Know

02 May 2024

On 3rd April, 2024, the National Stock Exchange of India (NSE) announced a launch of 4 new indices viz. Nifty Tata Group 25%, Nifty MidSmall Healthcare, Nifty500 Multicap Infrastructure 50:30:20 and Nifty500 MultiCap India Manufacturing 50:30:20 which would commence on 8th April, 2024. With the launch of these 4 new indices, NSE aims to broaden its offerings with focus on specific sectors, themes, and corporate groups, offering investors more exposure to Indian markets options. These newly formed indices are designed to fulfil the rapidly increasing demand for thematic investments and providing solutions for a diverse range of investment strategies among market participants.


So, let’s understand the composition of these 4 indices, the stocks in each index and why do these new indices matter in detail -


1)  Nifty Tata Group 25% Cap Index  

Nifty Tata Group 25% Cap Index is designed to provide investors with a focused indication of the performance of the Tata Group, one of India's largest and most significant conglomerates. Here’s a breakdown of its key features:

Composition: This index is made up of 10 major companies that are part of the Tata Group. These companies are selected based on their performance and representation of the conglomerate's diverse portfolio, which spans across various sectors of the economy.

Free-Float Market Capitalization Weighting Scheme: The index uses a free-float market capitalization method to determine the weight of each company within the index. Free-float market capitalization is calculated by taking the company's share price and multiplying it by the number of shares available for public trading, excluding shares held by insiders, promoters, and governments. This method ensures that only the shares available for public trading are considered, providing a more accurate reflection of market dynamics.

25% Cap on Individual Stock Weight: Nifty Tata Group 25% Cap Index has a cap of 25% on the maximum weight any individual stock can have in the index to prevent any single company from having too much influence on the index's performance,. This means that no matter how large the market capitalization of a company grows, its weight in the index cannot exceed 25%. This cap ensures diversification and reduces the risk of the index being overly dependent on the performance of a single company.

Key Players: Some of the prominent companies included in this index are Tata Consultancy Services (TCS), Tata Motors, Titan Company, and Tata Steel. Nifty Tata Group 25% Cap Index has delivered over 17% returns since inception.

Comprehensive Exposure to the Tata Group: By investing in a financial product that tracks this index, investors can gain broad exposure to the Tata Group's portfolio through a single investment. This simplifies the process for investors looking to tap into the conglomerate's performance without having to individually invest in each company.


2)  Nifty MidSmall Healthcare Index 

The Nifty MidSmall Healthcare Index is designed to monitor and capitalize on the performance of India's healthcare sector, particularly focusing on mid and small-cap companies in healthcare. This index provides a nuanced understanding of the healthcare industry's growth dynamics by tracking a select group of companies. Here’s a detailed explanation of its components:

Composition: The index consists of up to 30 companies selected from the Nifty MidSmallcap 400 index in the Healthcare space. These companies are chosen based on their market capitalization within the healthcare sector, ensuring a representative sample of the industry's broader trends and opportunities.

Mid and Small-Cap Focus: By concentrating on mid and small-cap companies, the index provides exposure to firms that may have higher growth potential compared to their larger counterparts. This segment often includes companies that are in a phase of rapid development or are specialized in niche areas within healthcare, offering unique investment opportunities.

Key Players: Notable companies within this index include Max Healthcare, Lupin, Aurobindo Pharma, and Alkem Laboratories among others.

Investment Opportunity: The Nifty MidSmall Healthcare Index serves as a tool for investors looking to specifically invest in the healthcare sector's mid and small-cap segment. Tracking this index, investors can gain a more focused insight into the sector’s growth prospects, beyond the large-cap dominated indices. This can be particularly appealing for those seeking to diversify their portfolios with investments in healthcare sector seeking higher growth


3)  Nifty500 Multicap India Manufacturing 50:30:20 Index 

Nifty500 Multicap India Manufacturing 50:30:20 Index is designed to gauge the performance of the manufacturing sector within the Indian economy, spanning across various market capitalizations. Here's an in-depth look at its structure and significance:

Composition: Nifty500 Multicap India Manufacturing 50:30:20 Index comprises of companies from the Nifty 500 index  which are focused on manufacturing and rank higher in terms of their market capitalization. This index hence provides a focused yet diverse view of the sector while focusing on the top companies in the manufacturing sector.

Multi-Cap Structure: Nifty500 Multicap India Manufacturing 50:30:20 Index adopts a unique weighting strategy that allocates 50% to large-cap companies, 30% to mid-cap companies, and 20% to small-cap companies. This multi-cap approach ensures that investors have exposure to companies of different sizes, reflecting the varied dynamics and growth potentials within the manufacturing sector. The index with its diversity in large-caps offers stability, growth potential with mid-caps stocks, and high-risk high-reward opportunities with small-caps cos.

Key Companies: Prominent members of this index include Reliance Industries, Mahindra & Mahindra, Sun Pharma, Cipla, JSW Steel and Tata Motors among others. These companies are leaders in their respective fields and represent the diverse nature of India's manufacturing industry, from conglomerates with extensive manufacturing interests to firms specialized in sectors like pharmaceuticals and automotive.


4)  Nifty500 Multicap Infrastructure 50:30:20 Index 

Nifty500 Multicap Infrastructure 50:30:20 Index has been crafted to track the performance of the infrastructure sector within the Indian market, covering companies across market capitalizations. This index is pivotal for investors aiming to tap into the infrastructure development narrative of India. Below is a detailed breakdown of its key aspects:

Composition: The index selects its constituents from the Nifty 500 index by focusing on companies in the infrastructure sector from the top 500 companies by market capitalization on the National Stock Exchange of India (NSE). The focus on infrastructure companies within this broad pool allows for a specialized yet comprehensive perspective on the sector.

Multi-Cap Structure: Similar to its manufacturing-focused counterpart, Nifty500 Multicap Infrastructure 50:30:20 Index employs a strategic weighting approach with 50% allocated to large-cap companies, 30% to mid-caps, and 20% to small-caps. This diversified approach aims to capture the growth and innovation across all company sizes within the infrastructure sector, balancing stability with potential high-growth opportunities.

Key Companies: Featuring major players such as Reliance Industries, Larsen & Toubro, Bharti Airtel, and NTPC, the index highlights the diversity within India's infrastructure sector. These companies play a significant role in their respective sub-sectors, from telecommunications to construction and energy, illustrating the broad spectrum of infrastructure development in India.

Benefits: The Nifty500 Multicap Infrastructure 50:30:20 Index offers multiple advantages, including a diversified investment in the infrastructure sector, a balanced exposure across different market capitalizations, and the convenience of following the sector's performance through one index. It caters to investors looking for a comprehensive investment solution that captures the essence of India's infrastructure development, from established conglomerates to smaller companies driving innovation and growth.

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It is to be noted that the NSE's initiative to launch these focused indices is a commendable step towards enriching India's financial market landscape, providing investors and traders with sophisticated tools to navigate the complexities of the market. These indices not only cater to the varied investment appetites of market participants but also contribute to the deeper integration of the Indian markets with global investment trends. By offering targeted exposure to sectors and themes that are integral to India's growth story, these indices empower investors to participate in and benefit from the country's economic progress, making them a pivotal component of any well-rounded investment strategy.


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