What does the launch of four new indices by NSE mean to investors?

The National Stock Exchange (NSE) is all set to launch four new indices in both the cash and futures and options segments on April 8.

The new indices that are scheduled to be launched are Nifty Tata Group 25% Cap, Nifty 500 Multicap India Manufacturing 50:30:20, Nifty 500 Multicap Infrastructure 50:30:20, and Nifty MidSmall Healthcare.

The introduction of four new indices, analysts say, will give a more comprehensive approach to participating in the economic growth of India. Further, as regards a separate index for Tata Group companies, they note that it recognises the significant influence of Tata Group companies on the Indian stock market.

Manish Chowdhury, Head of Research at StoxBox, said that the additional indices will provide a more well-rounded approach to participating in the country's economic growth. 

Chowdhury also thinks that with the competitive intensity increasing due to the rival BSE offering various products in its F&O segment, these additions would provide a competitive advantage to the NSE and help it garner market share going forward. 

Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, believes increased transparency and granularity can benefit both individual companies and the broader market ecosystem.

Will there be any changes after the four indices are launched? 

Some experts think there won't be any impact of the move on other indices. 

"We do not foresee changes in other indices due to the launch of four new indices, as the NSE has already introduced recent measures such as reductions in lot sizes for major indices," said Manish Chowdhury, Head of Research, StoxBox. 

Echoing a similar view, Wright Research, PMS' Sonam Srivastava said, "The launch of these four new indices by the NSE is unlikely to cause significant changes to existing indices. Existing indices like the Nifty 50 will likely continue to function as broad market benchmarks." 

On the other hand, CA Manish Mishra, Co-Founder of GenZCFO, believes that the addition of new indices by the NSE could impact the composition and performance of existing indices, depending on the sectors and companies included in the new indices, leading to potential changes in market dynamics.

Aditya Goela - CFA & Co-Founder of Goela School of Finance also believes the launch of these indices might influence overall market sentiment, especially towards sectors highlighted by the new indices. This could lead to a reallocation of investments across different market segments, based on perceived opportunities.

 

What does a separate index for Tata Group company mean? 

StoxBox's Chowdhury believes that the turnaround in various Tata Group companies due to changes in strategy, operational performance improvement, and reduction in corporate structure complexity has generated huge market interest in the Tata Group companies.

Furthermore, as per him, the rollout of more such indices by other corporate groups cannot be ruled out in the future.

As per CA Manish Mishra, a separate index will ensure transparency and facilitate targeted investment analysis within Tata Group companies. 

Wright Research, PMS' Srivastava said a separate index for Tata Group companies suggests a recognition of the Tata Group's substantial influence on the Indian stock market.

What do the new indices mean for the infra and manufacturing sector?

As per experts, the Nifty 500 Multicap Infrastructure 50:30:20 and Nifty 500 Multicap India Manufacturing 50:30:20 indices hold particular promise for the infrastructure and manufacturing sectors. 

These indices assign weightage based on market capitalisation (large, mid, and small cap), providing a more comprehensive view of these sectors' health. As per Wright Research, PMS' Srivastava, this can attract greater investment and fuel growth within these crucial industries.

StoxBox's Chowdhury believes the introduction of indices focused on infrastructure and manufacturing fills the much-needed gap for market participants. The increasing investor interest in the manufacturing theme due to the revenue visibility and stable government policies should ideally garner market interest as it allows broader market participation in the sector.

As per Aditya Goela, companies listed within these sectoral indices may experience enhanced liquidity due to increased trading activity and increased investment can lead to more capital being available for companies in these sectors for expansion and development projects, further driving sectoral growth and contributing to the overall economy.

Catch the latest stock market updates here. For all other news related to business, politics, tech and auto, visit Zeebiz.com.

DISCLAIMER: The views and investment tips expressed by investment experts on zeebiz.com are their own and not those of the website or its management. zeebiz.com advises users to check with certified experts before taking any investment decisions.