With a substantial 64% of India's population residing in rural areas, the Nifty Rural index offers investors a unique opportunity to gauge the economic dynamics of this vital segment. By focusing on sectors that directly impact rural livelihoods and infrastructure, the index provides valuable insights into consumption patterns and investment prospects.
The index methodology involves selecting the top 75 stocks based on their free-float market capitalization from eligible basic industries. The base date for the index is 1 April 2005, and the base value is 1000. The index is reconstituted semi-annually and rebalanced quarterly.
The Nifty Rural Index is weighted heavily towards financial services (24.57%), fast moving consumer goods (20.49%), and automobile & auto components (18.07%).
The index has delivered strong double-digit returns across all timeframes. The best performance was in the past year, with a total return of 35.43%. The long-term performance is also positive, with a total return of 16.58% CAGR since inception (1 April 2005).
ITC is the top constituent of the index, with a weight of 7.80%. It is followed by Bharti Airtel (7.68%), State Bank of India (6.48%), Mahindra & Mahindra (5.53%), and Hindustan Unilever (4.39%). These five companies together account for nearly 32% of the index's weight.
NSE expects the Nifty Rural index to serve as a benchmark for asset managers and underpin the development of passive investment products like exchange-traded funds (ETFs) and index funds.
This new index is anticipated to play a crucial role in channeling investments towards rural India, thereby contributing to its overall economic progress.
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