With an aim to align with global best practices, NSE group firm India Index Services & Products Ltd (IISL) today decided to introduce five new indices under its Nifty basket besides revising the stock selection parameters for various other indices.
The five new indices -- Nifty Midcap 150, Nifty Smallcap 250, Nifty Full Midcap 100, Nifty Smallcap 50, Nifty Full Smallcap 100 -- would be published from the next financial year (April 1, 2016).
With this, the new structure of Nifty would include 11 broad market indices.
"The new structure ensures that a company will be classified into only one of the segments viz large, mid and small market capitalisation and provides better reflection of the performance of the respective segments," IISL Chief Executive Officer Mukesh Agarwal said.
"With the launch of Nifty Smallcap 50 index, IISL will have 50 stock index in each of the three segments," he said, adding that the new indices and the index restructuring would facilitate introduction of investment products.
Meanwhile, IISL has also revised the stock selection criteria for various indices as well as the methodology for calculation of total return index and operational guidelines governing index maintenance.
As per the new norms, the equity securities with differential voting rights (DVRs) would be eligible for inclusion in an index on certain parameters.
For such securities, market capitalisation criteria
Would
be measured at a company level by aggregating the market
Value
of individual class of security meeting the liquidity criteria for the respective index.
Each class of security issued by a company should meet the liquidity criteria applicable for the respective indices.
Among others, free float of DVR equity class share should be at least 10 per cent of the free-float market capitalisation of a company (voting equity class share and DVR equity class share) and 100 per cent free-float market capitalisation of the last security in respective index.
"This requirement shall be applicable only to those indices that are calculated based," IISL said in a statement.
For eligibility pertaining to equity derivatives, IISL said a stock must be available for trading in NSE's Futures & Options segment.
Moreover, IISL has removed the minimum free-float
requirement of 10 per cent for stocks, in view of the regulatory requirement of maintaining minimum 25 per cent public shareholding for listed companies.
"The selection of constituents for each of existing
Broad
Market and Sectoral indices shall be made from the universe of companies that rank within top 800, based on both
Average
daily turnover and average daily full market capitalisation.
"The selection of stocks for Nifty Midcap Liquid 15 index shall be made from Nifty Midcap 50 index," it added.
The revised methodology for computation of total return index would be made effective from April 1, while operational guidelines governing index maintenance would be implemented from February 26 this year.
Individually, the new index Nifty Midcap 150 would represent the next 150 companies (companies ranked 101-250) based on full market capitalisation from Nifty 500.
"This index intends to measure the performance of mid market capitalisation companies revised," the company said.
Nifty Smallcap 250 would represent balance 250 companies (those ranked 251-500) from Nifty 500 and measure the performance of small market capitalisation firms.
Nifty Full Midcap 100 includes all the companies from Nifty Midcap 50, remaining companies are selected based on average daily turnover from Nifty Midcap 150 index.
The fourth index, Nifty Smallcap 50, would have top 50 companies selected based on average daily turnover from top 100 companies selected based on full market capitalisation in Nifty Smallcap 250 index.
On the other hand, Nifty Full Smallcap 100 includes all the companies from Nifty Smallcap 50. Remaining companies are selected based on average daily turnover from top 150 companies selected based on full market capitalisation from Nifty Smallcap 250 index.
The existing Nifty basket includes Nifty 50, Nifty Next 50, Nifty 500, Nifty 200 and Nifty 100.
