NCDEX launches NDEX, FINNDEX equity benchmarks

NCDEX has launched NDEX and FINNDEX, two equity benchmarks that form part of its expansion towards a multi-segment exchange, Economic Times Markets reported on October 22. NDEX tracks 20 large and liquid Indian equities, while FINNDEX covers 15 financial-sector stocks and excludes insurance companies.

The launch is a step in the exchange’s plans to enter equity and equity derivatives markets. The announcement describes the indices and their construction, rather than the start of trading in specific derivative contracts.

How the stocks and their weights are chosen

NDEX draws its constituents from the top 60 NSE-listed companies. FINNDEX selects its constituents from the top 40 eligible financial-sector companies.

Both benchmarks use a composite scoring system with four inputs: free-float market capitalisation and average daily traded value each account for 30%, while beta and volatility each account for 20%. The approach brings company size, trading activity and measures of market sensitivity into the selection framework.

Those scoring proportions are not the final portfolio weights. Each constituent’s final weight gives equal importance to its free-float market-capitalisation weight and its composite-score weight. A single stock cannot exceed 15% of either index at rebalancing.

Twice-yearly reviews and real-time values

NSE Indices Ltd calculates and maintains both benchmarks. Scheduled reviews and rebalancing take place in March and September, with provision for additional reconstitution in specified circumstances.

Both indices use January 2010 as their base month and 10,000 as their base value. Index values will be calculated and distributed in real time during market hours through NCDEX’s data feeds and website, with periodic factsheets also available.

A broader role in India’s capital markets

Vikas Goel, NCDEX’s managing director and chief executive, described the launch as an important step in the exchange’s move towards operating across multiple market segments. He linked the expansion to the changing requirements of India’s financial system and rising participation from domestic and international investors.

Goel said the benchmarks were intended to help investors make informed decisions and widen the tools available to market participants. These are the exchange’s stated objectives, rather than measured outcomes of the launch.

Tojo Banerjee, chief of equity business at NCDEX, said the construction framework looks beyond market capitalisation. He described FINNDEX as covering capital-markets businesses, non-banking financial companies and fintech alongside traditional banking, while NDEX provides a benchmark for large, actively traded Indian companies.