NSE Revises Stock Selection Criteria for Nifty Indices

On 23 August, the NSE Index committee made some significant changes to the criteria and the composition of the various capitalization indices and sectoral indices. There are two very significant shifts that the Index Committee has made in the index criteria, effective 30-Sep.

The first big shift is with respect to the eligibility for inclusion of REITs and INVITs in the indices. Currently, only equity shares are eligible to be included in the index. Going ahead, even REITs and INVITs have been declared as eligible securities to be included in indices. This will bring a lot of global passive funds to invest in REITs and INVITs.

The second big change is to give a better representation to the pharma sector in the sectoral index. Currently, only the top-10 pharma stocks are considered for inclusion in the pharma index based on 6-month average free-float capitalization. That is now being modified to 20 pharma stocks to give a wider choice for inclusion in the pharma index.

Major changes in key indices

There will be no changes in the Nifty 50 Index composition as part of this semi-annual review. However, other indices are likely to see shifts as captured in the table.