What are Broad Market Indices?
An index is a statistical measure of performance of a group of stocks. While the methodology used to calculate an index may vary, the end goal of each is to provide a benchmark for observing the group’s average price movements over time. Investors seeking the largest diversification benefit can invest in securities included in an index or in other financial products, such as index funds.
Securities based on broad-based indexes, such as index funds, enable investors to virtually own the same basket of companies as a large index with relatively little capital commitments.
Broad-based indices are constructed using large, liquid stocks listed on the exchange. They act as a proxy for the performance of professional fund managers, such as those who manage mutual funds.
The NSE has produced a variety of broad market indices meaning the exchange’s most extensive, most liquid stocks. They act as a proxy for the performance of professional fund managers, such as those who manage mutual funds.
The NIFTY 500 index comprises the top 500 firms in the qualifying universe, as measured by total market capitalisation.
The NIFTY 100 index represents the top 100 firms in the NIFTY 500 by market value. This index is designed to detail the performance of companies with substantial market capitalisation.
In market capitalisation, NIFTY Midcap 150 comprises the following 150 firms (ranked 101–250) in the NIFTY 500. This index is meant to track the performance of firms with a market capitalisation of less than $1 billion.
NIFTY Smallcap 250 is a subset of the NIFTY 500, comprising the remaining 250 companies (ranked 251–500). This index is created to track the performance of small-capitalisation companies.
The index comprises 50 firms chosen from the NIFTY 100 universe based on free-float market capitalisation and liquid companies with an average impact cost of 0.50 percent or less for 90% of observations for a basket size Rs. 10 crores. The constituents should be able to trade derivatives on the NSE.
It is composed of the remaining 50 businesses from the NIFTY 100 after removing the NIFTY 50. On quarterly rebalance dates, the index’s cumulative weight of non-F&O equities is set at 15%. Additionally, on quarterly rebalance dates, non-F&O equities in the index are individually capped at 4.5 percent. Stocks’ capping factors are realigned in response to changes in equity, investible weighted factor (IWF), replacement of scrips in the index, periodic rebalancing, and every quarter on the last trading day of March, June, September, and December, by using closing prices on a T-3 basis, where T day is the last trading day of March, June, September, and December.
It covers the top 50 firms from the NIFTY Midcap 150 index based on their total market capitalisation. Preference is given to companies who are currently listed on the NSE’s Futures & Options segment.
It comprises the whole NIFTY Midcap 50. The remaining companies are chosen based on their average daily turnover from the NIFTY Midcap 150 index.
It is composed of a select group of 25 stocks from the Nifty Midcap 150 index. Stocks are chosen for inclusion in the index based on their market capitalisation, average daily volume, and availability for trading on the NSE’s Futures & Options segment (F&O).
It comprises the top 50 companies ranked by an average daily turnover from the top 100 companies ranked by total market capitalisation in the NIFTY Smallcap 250 index.
It comprises the entire NIFTY Smallcap 50. The remaining companies are chosen based on their average daily turnover from the top 150 companies in the NIFTY Smallcap 250 index.
The NIFTY 200 index comprises all companies included in the NIFTY 100 and NIFTY Midcap 100 indexes.
- NIFTY LargeMidcap 250
It comprises the whole NIFTY 100 and NIFTY Midcap 150. Its purpose is to track the performance of major and mid-cap enterprises. The combined weighting of considerable size and mid-cap equities is 50% each and is changed quarterly.
- NIFTY MidSmallCap 400
It comprises all firms listed on the NIFTY Midcap 150 and NIFTY Smallcap 250 indexes. Its purpose is to track the performance of mid-and small-cap firms.
- Nifty500 Diversified 50:25:25
It invests in a portfolio of large, mid, and small-cap companies, with weights of 50%, 25%, and 25% applied to each size segment on quarterly rebalance dates.
Indexes of the broad market – Review and eligibility criteria
The broad market indices are reviewed semi-annually using six-month data during January and July. Companies must be a part of a relevant sector to qualify for inclusion in the NIFTY 500 index.
The following are the eligible universe/minimum eligibility criteria:
– The company must be registered and traded in India (listed and traded or not listed but traded).
Listed companies that are authorised to trade) on the National Stock Exchange (NSE) are eligible to be included in the Indices NIFTY.
– Guaranteed convertible stock, bonds, warrants, rights, preferred stock fixed-return securities, suspended securities, and securities classified under the BZ series are not included.
– Differential Voting Rights (DVR) equity shares are eligible for inclusion in the index subject to specific DVR-related criteria being met
– At a minimum, the investable weight factor (IWF) of the stock should be 0.10 (10% free float); OR the stock’s month-to-month average free-float market capitalisation should be at least 25% of the 6-month average of the index’s smallest constituent’s complete market capitalisation (previous) by total market capitalisation in the NIFTY 500 as of the cut-off date
– Companies must have been traded for at least 90% of the days in the preceding six months.
– Businesses must have an average impact cost of less than 1% over the preceding six-month period
– Eligibility criteria for newly listed securities are determined using three-month data rather than a six-month term
– Businesses should be ranked within the top 800 in terms of both average daily turnover and daily market capitalisation based on data from the previous six months
When an index is reconstituted, a firm that has undergone a plan of arrangement is included for corp events such as spin-offs, capital restructurings, etc., inclusion in the index if, as of the index reconstitution data cut-off date, a firm has completed three calendar months of trading following the stock’s ex-dividend date subject to compliance with all index eligibility conditions.
