NCDEX launches NDEX, FINNDEX with multi-factor stock selection

NCDEX has launched NDEX and FINNDEX, two Indian equity benchmarks that extend its offering beyond its established commodities business, Economic Times Markets reported on October 22. The indices track large, liquid shares and financial-sector companies, respectively, using a methodology that considers more than company size.

NDEX holds 20 stocks drawn from the top 60 NSE-listed companies. FINNDEX comprises 15 financial-sector stocks selected from the top 40 eligible companies, with insurance businesses excluded.

Four factors shape selection and weighting

Both indices use a composite score built from four inputs. Free-float market capitalisation and average daily traded value each contribute 30%, while beta and volatility each contribute 20%. The framework brings together measures of size, trading liquidity and market behaviour.

The final weight of each constituent blends its free-float market-capitalisation weight and its composite-score weight in equal proportions. Each stock is subject to a 15% weight cap at rebalancing, a limit intended to reduce concentration.

Reviews and rebalancing are scheduled for March and September each year, with additional reconstitution permitted in specified circumstances. Both benchmarks use January 2010 as their base month and 10,000 as their base value; that historical reference is distinct from their launch.

Financial benchmark reaches beyond banks

FINNDEX is designed to cover a wider range of financial businesses, including capital-market companies, non-banking financial companies and fintech firms alongside traditional banks. NDEX, by contrast, provides a cross-sector benchmark for large and liquid Indian equities.

NCDEX chief of equity business Tojo Banerjee described the approach as a way to incorporate stock-selection and market-behaviour factors beyond market capitalisation. Managing director and chief executive Vikas Goel linked the launch to the exchange’s plans to become a multi-segment institution, including expansion into equities and equity derivatives.

NCDEX owns the indices; NSE Indices handles calculation

The benchmarks belong to NCDEX, while NSE Indices Ltd will calculate and maintain them. Real-time values will be distributed during market hours through NCDEX’s data feeds and website, with periodic factsheets also available.

The indices offer reference measures for investors and researchers assessing Indian equities and financial companies. Their eventual use in investment products, and their wider significance as benchmarks, will depend on market adoption rather than the launch alone.