Nifty Realty

What is NIFTY Realty?

NIFTY Realty is a sectoral index on the National Stock Exchange (NSE) capturing the performance of the realty sector in the Indian economy on a real-time basis. It is constituted of 10 stocks that are engaged in the business of construction of real estate properties. The basic industries eligible for inclusion in the NIFTY Realty index are the ones dealing with Residential and Commercial Projects.

This NIFTY Realty index was launched on August 30, 2007, with the base date as December 29, 2006, and the base value at 1000. The NIFTY Realty share price since inception has fallen to the level of 400 at ~52 P/E multiples- an erosion of 600 base points. It is reconstituted semi-annually in order to ensure that it continues to reflect the changing dynamics of the Indian real estate industry.

The NIFTY Realty index is owned and managed by NSE Indices Limited, previously known as India Index Services & Products Limited. The Realty index is governed by a three-tier structure that comprises the BOD of NSE Indices, the Index Advisory Committee, and the Index Maintenance Sub-Committee.

NIFTY Realty has a variant in the form of the NIFTY Realty Total Returns Index. This index has several practical applications in structured investment products, index funds, ETFs, and benchmarking fund portfolios.

Nifty Realty Stocks Selection Criteria

The NIFTY Realty share price is computed by weighting its 10 stocks on the basis of periodically capped free-float market capitalization relative to a base market capitalization value on a real-time basis.

The below-listed eligibility criteria need to be met for inclusion:

1. Should be listed on the National Stock Exchange.
2. Should form a part of NIFTY 500.
3. If the number of eligible stocks falls below 10, then in such cases, the deficit number of stocks shall be selected from the universe of top 800 ranked stocks based on both average daily turnover and average daily full market capitalization data of the previous six months from NIFTY 500’s universe.
4. Should be a part of the realty sector.
5. Should have a trading frequency of at least 90% in the past six months.
6. Should have a listing history of at least six months.
7. A recently listed company (IPO) can be included if it meets the above eligibility criteria for a period of three months instead of six months.
8. Should adhere to the cap of 33% in case of a single stock and 62% for the top 3 stocks cumulatively at the time of rebalancing.

How is Nifty Realty Calculated?

The index value is calculated as follows –

Index value = Current market capitalization/ (Base market capitalization * Base Index Value)

The NIFTY Realty index is rebalanced semi-annually based on six months of data, with the cutoff date being January 31 and July 31 of each year. The replacement of stocks in NIFTY Realty (if any) is implemented from the last trading day of March and September after giving four weeks prior notice to the market.