Nifty Realty

What is NIFTY Realty?

NIFTY Realty is a specialised sectoral index on the National Stock Exchange (NSE) that provides a benchmark for the performance of the real estate sector in India. This index includes companies that are primarily engaged in activities related to the construction, development, and sale of residential and commercial properties.

By tracking the NIFTY Realty index, investors can get a comprehensive view of how the real estate sector is performing, making it a valuable tool for those interested in this specific market segment.

The NIFTY Realty index was created to give investors and analysts a clearer picture of the real estate sector's health and trends. The index comprises a diversified set of top 10 realty companies listed on the NSE, covering a wide range of activities within the real estate domain, including residential buildings, commercial properties, and mixed-use developments.

The inclusion of companies in the NIFTY Realty index is based on their market capitalisation, liquidity, and sector representation. This ensures that only significant and actively traded real estate companies are part of the index. As the real estate sector can be volatile and influenced by various economic factors, the NIFTY Realty index provides a stable benchmark to measure and compare the performance of individual stocks within the sector.

The NIFTY Realty index is managed and owned by NSE Indices Limited, which ensures that the index is accurately maintained and updated to reflect the latest market conditions. The index is reviewed and rebalanced semi-annually to include the most relevant companies, ensuring that it continues to represent the real estate sector effectively.

How is Nifty Realty Index Calculated?

The Nifty Realty index was launched in 2007 with a base value of 1000 and is calculated using the free-float market capitalisation method. This method considers only the shares that are readily available for trading, excluding locked-in shares such as those held by promoters. The formula for calculating the index is as follows:

NIFTY Realty Index =(Sum of Market Capitalisation of Constituent Stocks) / (Base Market Capitalisation) × (Base Index Value)

Let’s see how this works. Let’s assume Company A is part of the index with the following data:

1 Cr shares, price per share ₹ 50.

Market capitalisation = 10,000,000 shares x ₹ 50 = ₹ 500,000,000.

Free float factor 70%

Free float market cap = ₹ 500,000,000 x 0.70 = ₹ 350,000,000

Similarly, the free float market cap of all the constituent companies is calculated and summed up. Thereafter, it is divided by the base market cap and then multiplied with the base index value to arrive at the NIFTY Realty index value.

What is the Selection Criteria for Nifty Realty Stocks?

The selection criteria for Nifty Realty stocks ensure that only the most relevant and liquid companies are included in the index. The key criteria are:

Listing:The stock must be listed on the NSE and be a part of the NIFTY 500 index.

Sector:The company should belong to the real estate sector.

Market Capitalisation:The stock must have a significant market capitalisation, ensuring that it represents a substantial portion of the market.

Free-float Market Capitalisation:The company must have a high free-float market capitalisation, reflecting the shares available for trading.

Liquidity:The stock should have high trading volumes, ensuring that it is easily tradeable.

Trading Frequency:The stock should have a high trading frequency, ensuring it is actively traded. It should not be less than 90% in the previous six months.

These criteria are reviewed twice every year, and the index is reconstituted to ensure it remains representative of the real estate sector. If the number of eligible stocks drops below 10, the deficit is filled by selecting stocks from the top 800 ranked relevant stocks. These are chosen based on average daily turnover and average daily full market capitalisation data from the past six months, within the NIFTY 500 index.

How Can You Invest in Nifty Realty?

Investing in Nifty Realty can be done through various methods, providing flexibility for different types of investors:

Direct Investment in Stocks:You can directly purchase shares of the companies listed in the Nifty Realty index. To do this, you can refer to the Nifty Realty stock list and buy shares through a reputed and reliable online trading platform like the one offered by Motilal Oswal.

Exchange-Traded Funds (ETFs):ETFs that track the Nifty Realty index are available. These funds invest in the stocks constituting the index and provide a way for you to gain exposure to the entire sector without buying individual stocks.

Mutual Funds:Some mutual funds focus on the real estate sector and include Nifty Realty stocks in their portfolios. Investing in these mutual funds provides a diversified exposure to the sector.

Index Funds:Index funds that track the Nifty Realty index are another option. These funds aim to replicate the performance of the index by investing in the same stocks in the same proportions.

Derivative Products:For more sophisticated investors, derivative products such as futures and options based on the Nifty Realty index can be used to gain exposure or hedge existing positions.

By leveraging these investment options, you can benefit from the performance of the real estate sector in India, as reflected by the Nifty Realty index. Using tools like the Nifty Realty index chart, you can track the performance of the index and make informed decisions based on real-time data and trends.

NIFTY Realty FAQ's