NSE’s four new indices will offer greater diversification within investors’ areas of focus

In a highly competitive environment, the country’s stock exchange, NSE, on Monday, April 8, unveiled four new indices in both the cash and F&O segments. The new indices launched are Nifty Tata Group 25% Cap, Nifty500 Multicap India Manufacturing 50:30:20, Nifty500 Multicap Infrastructure 50:30:20, and Nifty MidSmall Healthcare. 

"Consequently, the broadcast of the indices will be made available to F&O members in NEAT+ terminals under the multiple index inquiry screen. So, typically, these specific indices also shed light on the importance of these sectors in a nation's growth," the NSE circular read.

"Members using Non-Neat Front End (NNF) can configure or develop their system to receive the index broadcast. The effective date for implementation of the circular will be April 8, 2024," the circular added. 

The move is widely said to ease investors' focus as they, given the new set of indices, will be able to gain more focus on securities focused on a particular sector or theme, including Tata Group stocks, healthcare, and infra.

Nifty Tata Group 25% Cap comprises 10 Tata Group stocks decided based on the free float market cap.

Nifty500 Multicap India Manufacturing 50:30:20: Considering the manufacturing space, the index invests across large, mid and smallcap stocks like RIL, Tata Motors and Sun Pharma among others from the broader Nifty 500 index.

Nifty500 Multicap Infrastructure 50:30:20: This index stocks focused on the infra space and invests across large, mid and smallcap stocks. The index comprises 75 stocks and weights are assigned as per the free float m-cap.

Nifty Mid Small Healthcare: From the ever-evolving healthcare sector, the index will comprise stocks from the mid and smallcap.

Palka Arora Chopra, Director, Master Capital Services, is of the view that the launch of the new indices is especially advantageous for individuals who aim to track the conglomerate's performance or seek growth opportunities within particular sectors. 

Diversification is provided within their respective areas of focus by the indices. For instance, the Nifty500 Multicap India Manufacturing and Infrastructure indices offer a combination of large, mid, and small-cap stocks, assisting investors in spreading their risk across various market capitalisations within expanding industries, Chopra added.

Additionally, there is a view that, with these structured indices, there could be an influx of both domestic and foreign funds. This potential increase in market depth and liquidity could benefit the companies included in these new indices by raising investor attention and visibility, potentially leading to increased demand for their shares. These new indices also serve as benchmarks for both individual investors and portfolio managers.

“Overall, the NSE's launch of these new indices empowers investors with greater choice, facilitates deeper market analysis, and fosters portfolio diversification. This can lead to a more informed and engaged investor base, ultimately benefiting the Indian capital markets,” noted Parth Nyati, founder of Tradingo.