NIFTY Alpha Low Volatility 30 Index
NIFTY Alpha Low-Volatility 30 is intended to mimic the performance of a portfolio of equities chosen using a 50:50 ratio of low volatility to alpha. Thirty equities chosen from the NIFTY Midcap 50 and NIFTY 100 indexes comprise this diversified index. These equities cover 14 economic sectors, with FMCG accounting for about 31% of the total. IT, healthcare, power, and chemicals are the next most represented industries. Together, these top 5 sectors make up over 50% of the index.
History of NIFTY Alpha Low-Volatility 30
On July 10, 2017, the NIFTY Alpha Low Volatility 30 index fund was introduced, using a base date of April 1, 2005, and a base value of 1000. Since its launch, the price of NIFTY Alpha Low-Volatility shares has surpassed 16,000 at about 29x P/E multiples. It is reconstituted every six months.
Management of NIFTY Alpha Low-Volatility 30
Previously known as India Index Services & Products Limited, NSE Indices Limited is the owner and manager of the NIFTY Alpha Low-Volatility 30 index. The BOD of NSE Indices, the Index Advisory Committee, and the Index Maintenance Sub-Committee make up the three-tier structure that governs it.
How are Stocks Selected for Inclusion in NIFTY Alpha Low-Volatility 30?
The following qualifying requirements must be met by the companies for them to be included in the NIFTY Alpha Low-Volatility 30 index:
- The National Stock Exchange should list the company.
- It should be included in the NIFTY Midcap 50 and NIFTY 100 indexes.
- The company must have a year's worth of listing history.
- The company should comprise the securities that can be traded on the derivatives division of the NSE.
- If the securities have traded for at least 12 calendar months before the deadline for index reconstitution, they will be included in the list of securities that have undergone schemes of arrangement, such as spin-offs, capital restructurings, etc.
- A stock is excluded if, according to the average percentile, its rank is lower than 50.
How is NIFTY Alpha Low-Volatility 30 Calculated?
The index value of Nifty Alpha Low Volatility 30 ETF is calculated as follows –
Index value = (Modified Index Market Capitalization / Index Divisor) * 1000
Where,
Modified Index Market Capitalization = Index Shares modified as per weight * Price
The Index Divisor is considered to have a value of INR 1 billion
Every year between June and December, the NIFTY Alpha Low-Volatility 30 index is assessed semi-annually using six months of data. When there is a suspension, delisting, or plan of arrangement, ad hoc rebalancing may be done. Since 2019, the Alpha Low-Volatility index has also been examined every three months to ensure that it complies with SEBI's guidelines for ETF/index fund portfolio concentration.
Should you Invest in the NIFTY Alpha Low-Volatility 30 index?
The NIFTY Alpha Low-Volatility 30 index has produced returns of 11.14% over the last 5 years and 18.55% overall since its launch. It has succeeded in maintaining minimal volatility, which is one of the index's objectives. It has maintained low beta levels and is connected with the NIFTY 50 index. If you want to invest in blue-chip firms outside of the top 50 stocks in the NIFTY, this is a good option.
