NIFTY Service Sector Index
The National Stock Exchange (NSE) has a thematic index called NIFTY Service Sector that tracks the services sector's performance in the Indian economy in real-time. It consists of 30 equities from 9 different sectors.
Sector Wise Representation in NIFTY Services Sector Index
The financial services sector has a representation of 55.36% of the total. Information technology comes in second, with 22.57%, a strong orientation toward digital and tech-based industries. These are then followed by smaller representations of the power and telecommunication sectors, which stand at 7.44% and 5.93%, respectively, pointing to some diversification but less investment in these sectors. Consumer services are represented with 4.02%, and healthcare represents 2.00%, thus portraying a moderate investment in these two sectors. It contributes 1.71% from the Services sector and a mere 0.97% from Oil, Gas & Consumable Fuels, which is the smallest.
History of NIFTY Services Sector Index
This NIFTY Services Sector index was launched with a base date of June 1, 1999, and a base value of 1000. Since its launch, the share price of the NIFTY Services Sector companies has surpassed 22,000 at ~20x P/E multiples. It has a semi-annual reconstitution schedule and a 33% cap on individual stocks. The NIFTY Services Sector Total Returns Index is a variation of the NIFTY Service Sector.
Industries Eligible for Inclusion in the NIFTY Services Sector Index
Airlines, AMC, BPO/KPO, Software & Consulting, Depositories & Clearing Houses, Education, Electric Utilities, E-Retail/E-Commerce, Exchange and Data Platform, Film Production, Distribution & Exhibition, Fintech, Gas Transmission/Marketing, General Insurance, Healthcare, Hotels & Resorts, HFC, Internet & Catalogue Retail, Logistics Solution Provider, Media & Entertainment, NBFC, Power – Transmission, Shipping, Stockbroking, Telecom, Travel Related Services, Trading & Distributors, TV Broadcasting,
Top Constituents by Weightage in the NIFTY Services Sector Index
- HDFC Bank Ltd.: 18.10%
- CICI Bank Ltd.: 12.71%
- Infosys Ltd.: 10.04%
- Tata Consultancy Services Ltd.: 6.61%
- Bharti Airtel Ltd.: 5.93%
- State Bank of India: 4.98%
- Axis Bank Ltd.: 4.93%
- Kotak Mahindra Bank Ltd.: 3.96%
- NTPC Ltd.: 2.94%
- Bajaj Finance Ltd.: 2.82%
Management of NIFTY Services Sector Index
NSE Indices Limited, formerly India Index Services & Products Limited, is the owner and manager of the NIFTY Services Sector index. The BOD of NSE Indices, the Index Advisory Committee, and the Index Maintenance Sub-Committee make up the three-tier structure that oversees the Services Sector index.
Eligibility Criteria for Selection of Constituent Nifty Service Sector Stocks:
The securities must meet the following eligibility requirements to be taken into consideration for inclusion in the NIFTY Services Sector index:
- The National Stock Exchange should list the company.
- It ought to be included in the NIFTY 500.
- The deficiency number of stocks will be chosen from the universe of the top 800 ranked stocks if the number of eligible stocks is less than 10, and will be determined by taking into account both the average daily turnover and the average daily complete market capitalization data of the preceding six months from the NIFTY 500 universe.
- The company should belong to the services industry.
- A new security will be included if its float-adjusted market capitalization is at least 1.5 times greater than the free-float market capitalization of the index's lowest component.
- The company must have traded at least 90% of the time throughout the previous six months.
- It should have a minimum of six months' worth of listing history.
- The company should follow the 33% cap for a single stock and the 62% cap for the top 3 stocks combined at rebalancing time.
How is the NIFTY Services Sector Index Calculated?
The index value is calculated as follows:
Index Value = Current Index Market Capitalization/ (Base Free Float Market Capitalization * Base Index Value)
Where,
Current Index Market Capitalization = Shares o/s * IWF * Capping factor * Price
IWF (Investible Weight Factors) = 1 as it is based on market capitalization method
Every year on January 31 and July 31, the NIFTY Services Sector index is rebalanced semi-annually using data spanning six months. Effective from the final trading day of March and September, any stocks in the NIFTY Services Sector will be replaced.
Financial Performance of NIFTY Services Sector Index
Since its launch, the NIFTY Services Sector index has returned 15.82% overall, and over the last five years, it has returned 12.69%. The results on the S&P 500 index have yielded a meager 1% dividend yield and are prone to volatility.
