NIFTY IT

IT or Information Technology industry has played a major role in the Indian economy. Also, to have a good benchmark of the Indian IT sector, the NSE Indices have developed the Nifty IT sector index. In this index, it provides investors and market intermediaries with an appropriate benchmark that captures the performance of the IT sector of the market. Also, the companies in this index are only those that have more than 50% of their turnover from IT-associated activities such as IT Infrastructure, Telecommunication Services, and Networking Infrastructure, IT Education and Software Training, Software Development, Vending, Hardware Manufacturer’s, Support, and Maintenance. It also captures the performance and working of the Indian IT companies. This index also comprises of 10 companies listed on the National Stock Exchange (or NSE). It can also be computed using a free-float market capitalization method, along with a base date of Jan 1, 1996, is indexed to a base value of 1000, in which the level of the index reflects the total free-float market value of entire stocks in the index relative to a particular base market capitalization value. Also, the base value of the index was being revised from 1000 to 100 with effect since May 28, 2004. It can also be used for several purposes, such as the launching of index funds, benchmarking fund portfolios, and ETFs and structured products. The Eligibility Criteria for the Selection of Constituent Stocks:

• The companies must rank within the top 800 based on both average daily turnover as well as average regular full market capitalization for the last 6 months.
• The companies should also form a part of the IT sector.
• Its trading frequency should be at least 90% in the last 6 months.
• It should also have a listing history of 6 months, as a company that comes out with an IPO would be eligible for the inclusion in the index, only if it accomplishes the normal eligibility criteria for the index of 3 months instead of 6 months.
• Also, the final selection of 10 companies shall be made based on the free-float market capitalization. Also, the preference would be given to companies that are available for trading in NSE’s Futures & Options segment during the final selection.
• The weightage of every stock in the index is to be calculated based on its free-float market capitalization in such a way that no single stock should be more than 34%, and the weightage of the top 3 stocks should not be more than 63% during rebalancing.

Index Re-Balancing: It is done based on a semi-annual basis, and the cut-off date is January 31 as well as July 31 of each year, i.e., and for a semi-annual review of indices, average data for 6 months ending the cut-off date is considered. Also, 4 weeks before the notice is given to the market from the date of the change. Index Governance: Also, a professional team manages all NSE indices, and there is a three-tier governance structure, which comprises the Board of Directors of NSE Indices Limited, the Index Advisory Committee (Equity) and the Index Maintenance Sub-Committee.