Nifty 50 – It is one of the main stock index of India, made up of 50 largest listed shares and serves as a barometer of market movement. Since its inception in 1995, the index has changed a lot.
The industry representation in Nifty 50 has undergone a sea change, just like the underlying Indian economy. New industries have evolved and become the core of the index while some of the erstwhile dominant industries lost relative importance in the index.
Initially the Nifty 50 construction methodology depended upon the impact cost initially but after 2009, the index adopted free float methodology to select the highly liquid stocks.
Currently, the Nifty 50 index is rebalanced on semi-annual basis and the cut-off dates are January 31 and July 31 of each year.
Let us take a deep dive in the Nifty 50 index composition and see how the weights of different industries have changed in the last 10 years:
Key industry changes:
Although the above table clearly shows industry rotation but I have highlighted few major trends:
- The share of Telecommunication industry has fallen to merely 3.6% in August 2018 from the highs of 34% in 2009. Hopefully Reliance JIO might list in near future and take the industry representation back of double-digit.
- Power, electric equipment and software industry forms more than 44% of the Nifty 50 index today while their representation used to be approximately 27% in 2008.
- The share of banks and oil explorers have fallen to 7.5% in 2018 from 20% in 2008.
Following are the annual changes in the Nifty 50 constitutes in last 10 years:
“The Wealth Ved” will continue to analyze the change in the Nifty 50 index on a monthly basis.