NSE Indices, a subsidiary of the National Stock Exchange of India, launched two new strategy indices: Nifty500 Quality 50 and Nifty500 Low Volatility 50.
The Nifty500 Quality 50 Index focuses on companies within the Nifty 500 with strong financial performance. The selection criteria for this index are based on factors such as Return on Equity (ROE), financial leverage (Debt/Equity Ratio), and earnings per share (EPS) growth variability over the past five years.
The Nifty500 Low Volatility 50 Index, on the other hand, aims to track the performance of companies within the Nifty 500 that exhibit lower price volatility. Volatility is calculated based on the standard deviation of daily price returns over the past year.
Both indices employ a combination of factor scores and free-float market capitalization to determine stock weights. Stock weights are capped to ensure diversification and limit concentration risk.
The base date for both indices is April 1, 2005, with a base value of 1000. The indices will be rebalanced semi-annually.
The Nifty500 Low Volatility 50 Index has exhibited a Compound Annual Growth Rate (CAGR) of 20.48% over the past five years and 18.33% since its base date.
Similarly, the Nifty500 Quality 50 Index has demonstrated a CAGR of 23.46% in the last five years and 18.37% since its base date.
These new indices are expected to serve as valuable benchmarks for asset managers and provide a reference point for the development of passive investment products such as Exchange Traded Funds (ETFs), index funds, and structured products.
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