Index changes have a story to tell

Financial advisory, Motilal Oswal, provided an interesting “time-lapse” of the Nifty 50 index across a period of 15+ calendar years, starting January 2002. Changes in constituents and changes in the weights of individual stocks and sectors also give us an insight into long-term returns. 

There was a key change in methodology in 2009. The Nifty started being weighted by free-float market capitalisation instead of absolute market cap. This reduced the importance of PSUs. The PSU weight in the Nifty is now just above 10 per cent, down from 31.5 per cent in 2008. The change also reduced the weight of PSU-dominated sectors