Nifty CPSE

NIFTY CPSE 

The NIFTY CPSE is a thematic index supporting the government to sell its holdings in central public sector companies (CPSEs). It consists of 12 stocks from 5 different sectors: Capital Goods, Metals & Mining, Power, Oil, Gas & Consumable Fuels, and Construction. It was launched on March 18, 2014, with a base date of January 1, 2009, and a base value of 1000. It is rebalanced every quarter with a 20% cap on index weights.

NSE Indices Limited is the owner and manager of the NIFTY CPSE index. The three-tiered framework that controls the CPSE index consists of:

• NSE Indices BOD, which oversees the index 
• Index Advisory Committee (Equity), which advises on the macro issues 
• Index Maintenance Sub-Committee, in charge of upholding the stock selection standards and index methodology.

How are NIFTY CPSE Stocks Selected?

Now that you know what is NIFTY CPSE, let’s take a look at the stock selection criteria. Stocks are eligible for inclusion in the NIFTY CPSE index if they meet the following requirements.

• A stock is listed on the National Stock Exchange (NSE).
• Stocks must be present in the list of Certified Private Sector Enterprises (CPSEs) issued by the Department of Public Enterprises.
• A stock should be owned by the central or state government with a 51% stake.
• A company’s average float-adjusted market capitalisation for the six-month period ending December 2019 should be more than one billion rupees.
• Companies that meet the dividend standards set by the Insurance Regulatory and Development Authority of India (IRDA) are eligible for inclusion.
• CPSEs listed on NSE after January 1, 2004, are included on the 1st trading day of the quarter following their listing.
• At first, the weight of each stock had a limit of 25%. However, they are rebalanced at 20% every three months (March, June, September, and December).

How is NIFTY CPSE Calculated?

The calculation of the NIFTY CPSE price involves weighing its twelve companies based on a periodically capped free-float market capitalization compared to base market capitalization value. 

The index calculation formula is as follows:

• Index Value = Current Index Market Capitalization/ (Base Free Float Market Capitalisation * Base Index Value)

Where,

• Current Index Market Capitalization = Shares o/s * IWF * Capping factor * Price 
• IWF (Investable Weight Factors) = 1 as it is based on the market capitalisation method 

NIFTY CPSE index's total return values are calculated every day. Corporate actions like mergers and demergers, will be subject to index evaluations. The Ministry of Disinvestment has appointed CPSE ETF issuer AMC as the authority to modify the index. Any change such as inclusion, exclusion, limitations, and change in eligibility criteria is possible after it makes a formal request.