NCDEX on October 22 launched two rule-based equity indices, NDEX and FINNDEX, as the exchange expands into the equity and equity derivatives segments.
The indices use a multi-factor methodology that combines free-float market capitalisation, average daily traded value, beta and volatility to select stocks and determine their weights.
Under the methodology, free-float market capitalisation and average daily traded value account for 30% each of the composite score, while beta and volatility carry a weight of 20% each. The final constituent weights combine free-float market-capitalisation weights and composite-score weights equally, with each stock capped at 15% at every rebalancing.
NDEX comprises 20 large and liquid Indian equities selected from a universe of 60 NSE-listed companies. FINNDEX comprises 15 financial sector stocks, excluding insurance companies, selected from the top 40 eligible companies.
The indices are owned by NCDEX and calculated and maintained by NSE Indices Ltd. They will be reviewed and rebalanced twice a year, in March and September, with provisions for ad hoc changes in specified circumstances.
Both indices have January 2010 as their base month and a base value of 10,000. Their values will be calculated and disseminated in real time during market hours through NCDEX’s data feeds, website and periodic factsheets.
Commenting on the launch, Vikas Goel, managing director and chief executive officer of NCDEX, said the indices mark a milestone in the exchange’s transition towards a multi-segment exchange.
Tojo Banerjee, chief of equity business at NCDEX, said the indices use an approach that goes beyond market capitalisation to account for factors influencing companies’ market behaviour.
He said FINNDEX covers financial sector companies beyond traditional banking, including capital markets, non-banking financial companies and fintech.