NSE launches Nifty Top 15 Equal Weight Index

The National Stock Exchange (NSE) has launched the Nifty Top 15 Equal Weight Index through its index services arm, NSE Indices. This new index will track the performance of the top 15 companies selected from the Nifty 50, based on their six-month average free-float market capitalisation, NSE said in an October 15 circular.

The index will be reconstituted semi-annually and rebalanced quarterly with each stock carrying equal weight. Its base date is March 2, 2006, with a base value of 1000. Only stocks part of the Nifty 50 at the time of review are eligible for inclusion.

The index is expected to serve as a benchmark for asset managers and be tracked by passive funds, including Exchange Traded Funds (ETFs), index funds, and structured products.

The Nifty Top 15 Equal Weight Index is expected to deliver total returns of 25.35% over one year, 18.17% over five years, and 14.87% since inception. In comparison, the Nifty 50 has higher returns, offering 33% over one year and 18.98% over five years, slightly outperforming the Top 15 Equal Weight Index.

The index includes Axis Bank, Bajaj Finance, Bharti Airtel, HDFC Bank, Hindustan Unilever, ICICI Bank, Infosys, ITC, Kotak Mahindra Bank, Larsen & Toubro, Mahindra & Mahindra, Maruti Suzuki India, Reliance Industries, State Bank of India, and Tata Consultancy Services. Weights vary slightly, with Hindustan Unilever at 6.76% and Infosys at 6.67%.

Sector-wise, Financial Services hold the highest weight at 39.95%, while Oil and Gas has the lowest at 6.56%.

The new index launch follows NSE's recent announcement to discontinue weekly derivatives contracts on the three of its indices namely BANKNIFTY, MIDCAP NIFTY, and FINNIFTY, in line with SEBI’s directive to strengthen the equity index derivatives framework for greater investor protection and market stability. Effective November 20, 2024, weekly derivatives will be available only on one benchmark index per exchange, with NSE offering them solely on the Nifty 50 Index. The last trading dates for weekly options on Nifty Bank, Nifty Midcap Select, and Nifty Financial Services are November 13, 18, and 19, respectively.

The introduction of Nifty Top 15 Equal Weight can impact the derivatives market by providing additional trading opportunities and enhancing liquidity. This allows investors to diversify their portfolios, as new indices, especially those that are equally weighted or sector-specific, offer unique hedging options. Furthermore, a new index serves as a benchmark for various financial products, such as ETFs and index funds, potentially leading to the creation of new derivatives contracts linked to it.