NSE Launches Nifty500 Quality 50 and Low Volatility 50 Indices for Strategic Investing

NSE Indices Limited, a subsidiary of the National Stock Exchange (NSE), has announced the launch of two new strategy indices—Nifty500 Quality 50 and Nifty500 Low Volatility 50. These indices are designed to track top-performing companies with strong quality metrics and low volatility, respectively.

Understanding the Nifty500 Quality 50 Index

The Nifty500 Quality 50 Index focuses on the top 50 companies within the Nifty 500, selected based on their Quality Scores. The quality score is derived from three key financial metrics:

• Return on Equity (ROE) – Measures profitability.
• Financial Leverage (Debt/Equity Ratio) – Assesses debt levels.
• Earnings Growth Variability – Evaluates consistency in earnings growth over the past 5-years.

Highlighting the Nifty500 Low Volatility 50 Index

The Nifty500 Low Volatility 50 Index targets companies with lower price fluctuations, providing a relatively stable investment option. Selection is based on:

• Volatility Scores – Calculated using the standard deviation of daily price returns over the last year.

Weighting and Rebalancing Methodology

Both indices use a hybrid weighting approach:

• Weightings are based on a combination of factor scores and free-float market capitalisation.
• Each stock’s weight is capped at the lower of 5% or 5 times its weight in the index based on free-float market capitalisation.

The indices have a base date of April 1, 2005, with a base value of 1000. They will be rebalanced semi-annually to ensure alignment with evolving market trends.

A Benchmark for Passive Investments

These indices are expected to act as benchmarks for asset managers and passive funds, including Exchange Traded Funds (ETFs), index funds, and structured products. By offering clear methodologies, they provide transparency and consistency for both institutional and retail investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.