What are the different types of NSE sectoral indices? MintGenie explains

The National Stock Exchange of India (NSE) is one of the premier stock exchanges in India, playing a pivotal role in the financial markets. A key feature of the NSE is its diverse range of sectoral indices, which serve as benchmarks for different sectors of the economy.

These indices help investors track the performance of specific industry segments, make informed investment decisions, and diversify their portfolios. In this blog, we will delve into the different types of NSE sectoral indices, providing an overview of their composition, purpose, and significance.

Sectoral indices are designed to represent the performance of a specific sector of the economy. They are composed of a selected set of companies from that sector, whose stocks are listed on the NSE.

These indices are crucial for investors who are interested in tracking the performance of specific sectors rather than the broader market. They provide a clear picture of how different sectors are performing, helping investors to identify trends and make strategic investment choices.

Here are different types of NSE sectoral indices every investor should be aware of:

1. Nifty Bank Index - The Nifty Bank Index is one of the most prominent sectoral indices on the NSE. It includes the most liquid and large-cap stocks from the banking sector. The performance of this index is a reflection of the overall health of the banking industry in India. Key constituents typically include major banks like HDFC Bank, ICICI Bank, and State Bank of India. It consists of 12 stocks.

2. Nifty Auto Index - It includes companies from the automobile sector, covering manufacturers of cars, bikes, trucks, and auto components. This index is a barometer of the performance and growth prospects of the Indian automotive industry. Maruti Suzuki, Tata Motors, and Mahindra & Mahindra are some of the prominent companies in this index. There are 16 stocks in the index.

3. Nifty Financial Services Index - It is designed to represent the behaviour and performance of the Indian financial market, encompassing banks, financial institutions, housing finance, insurance companies, and other financial services firms. It consists of 20 stocks.

4. Nifty Financial Services 25/50 Index - The Nifty Financial Services 25/50 is a new capped version of the Nifty Financial Services Index. In this version, "25" refers to the maximum percentage weight of a single stock, while "50" refers to the maximum aggregate percentage weight for all stocks with an individual weight exceeding 5%.

5. Nifty Financial Services Ex Bank Index - It aims to track the performance of a portfolio of stocks from the Financial Services sector, excluding banks. The largest 30 stocks from eligible basic industries are selected based on their 6-month average free-float market capitalization. The weights of the index stocks are determined by their free-float market capitalization, with individual stock weights capped at 25%.

6. Nifty FMCG Index - It is designed to reflect the behaviour and performance of FMCGs, which are non-durable, mass-consumption products readily available off the shelf. The index consists of 15 stocks.

7. Nifty Healthcare Index - It is designed to track the behaviour and performance of healthcare companies. It includes a maximum of 20 stocks.

8. Nifty Information Technology Index - It captures the performance of Indian IT companies engaged in IT infrastructure, IT education, software training, networking infrastructure, software development, hardware, IT support & maintenance and is composed of 10 companies.

9. Nifty Media Index - It is structured to reflect the behaviour and performance of the Media & Entertainment sector, encompassing printing and publishing. It consists of a maximum of 15 stocks.

10. Nifty Metal Index - It is tailored to reflect the behaviour and performance of the metals sector, which includes mining. It includes a maximum of 15 stocks within its composition.

11. Nifty Pharma Index - It is crafted to mirror the performance and behaviour of the pharmaceutical sector in India. The index comprises 20 companies.

12. Nifty Private Bank Index - The index tracks the performance of private sector banks listed on the NSE and consists of 10 stocks.

13. Nifty PSU Bank Index - The index reflects the performance of PSU banks. It includes all eligible public sector banks traded on the NSE, encompassing those listed and actively traded, as well as those permitted to trade, subject to meeting specific listing history and trading frequency criteria. The index consists of 12 stocks.

14. Nifty Realty Index - It is structured to mirror the performance of real estate companies primarily engaged in the construction of residential and commercial properties and consists of 10 stocks.

15. Nifty Consumer Durables Index - It is designed to track the performance of stocks within the consumer durables industry. It includes a maximum of 15 stocks.

16. Nifty Oil & Gas Index - It is structured to reflect the performance of stocks within the oil, gas, and petroleum industry. It includes a maximum of 15 stocks.

17. Nifty MidSmall Financial Services Index - It tracks the performance of midcap and small cap stocks in the financial services sector. It includes up to 30 stocks, with stock weights determined by their free-float market capitalization.

18. Nifty MidSmall Healthcare Index - It tracks the performance of midcap and small cap stocks within the healthcare sector. It comprises up to 30 stocks, with stock weights determined based on free-float market capitalization.

19. Nifty MidSmall IT & Telecom Index - It tracks the performance of midcap and small cap stocks in the information technology and telecommunication sectors. It includes up to 20 stocks, with stock weights determined by their free-float market capitalization.

In conclusion, NSE sectoral indices are essential tools for investors seeking insights into specific sectors of the Indian economy. By tracking these indices, investors can spot trends, assess industry health, and make informed investment decisions. Each index offers a focused view of its sector, aiding in portfolio diversification and risk management.

Understanding these indices is crucial for navigating the stock market's complexities and seizing sector-specific opportunities, making them pivotal in investment strategies. Whether experienced or new, monitoring these benchmarks provides valuable insights for sound investment choices.

Rohit Gyanchandani is Managing Director at Nandi Nivesh Private Limited