Nifty Auto

What is Nifty Auto?

The Nifty Auto is a sectoral index created by NSE Indices Limited, a subsidiary of the National Stock Exchange (NSE). The index is designed to measure the performance of the automobiles and auto ancillary stocks listed on the NSE.

The Nifty Auto index comprises companies engaged in the manufacturing of automobiles, including passenger cars, commercial vehicles, two-wheelers, and three-wheelers. It also includes auto-ancillary companies that manufacture components and provide services related to the automotive industry.

The Nifty Auto index is reviewed and rebalanced semi-annually to ensure that it accurately reflects the performance of the Indian automotive industry. During the semi-annual review, companies that meet the eligibility criteria are included in the index, and companies that do not meet the criteria are removed.

Investors, fund managers, and market analysts widely use the Nifty Auto index as a benchmark to gauge the performance of their investments in the automotive sector. Nifty Auto consists of 16 of the largest companies in the Indian automotive sector. The top 10 constituents in the Nifty Auto stock list and their respective weights are tabulated below.

Inclusion Criteria for Stocks in the Nifty Auto index

For a company to be included in the Nifty Auto stock list, it needs to satisfy the following eligibility criteria:

The company must be part of the Nifty 500 index.

If the number of stocks eligible to represent the Nifty Auto index is below 10, the deficit stocks shall be selected from the top 800 companies in terms of the average daily turnover and average daily full market capitalisation for the last six months.

The company must be a part of the automobile sector.

The company must have had a trading frequency of at least 90% in the last six months.

The company must have a listing history of at least 1 month as of the specified cut-off date.

The final set of 15 companies set to represent the Nifty Auto index will be selected from the list of eligible stocks on the basis of free-float market capitalisation.

The weightage of a single stock in Nifty Auto shall not exceed 33%, and the weightage of the top three stocks shall not be more than 62%.

How is the Nifty Auto Index Calculated?

The Nifty Auto index is calculated using the free-float market capitalisation method. Here is the process through which the index value is computed.

Step 1: Computation of free-float market capitalisation of stocks

The market capitalisation of each stock in the Nifty Auto index is calculated and adjusted for free-float using a free-float factor. Here is the mathematical formula that is used.

Free-Float Market Cap = [(Current Market Price x Number of Outstanding Shares) x Free-Float Factor]

Step 2: Computation of Nifty Auto index value

Once the free-float market cap of each stock in the index is computed, it is then used to arrive at the index value. The mathematical formula that is used to calculate the index value is as follows:

Nifty Auto = [(Free-Float Market Cap of All Constituents x Base Index Value) ÷ Base Market Cap]

Here, the base index value is 1,000, whereas the base market cap is the market capitalisation of all of the index’s stocks as of the base date of January 1, 2004.

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