NSE launches index to track electric vehicles

India’s largest stock exchange, NSE, has launched the country’s first Electric Vehicle (EV) index called Nifty EV & New Age Automotive index. What is this thematic index about? Why was it launched? How much weightage will each sector have in this index? Which companies’ performance will it track? When will its rebalancing occur? And what significance does it hold for investors who invest through mutual funds based on this index? Let’s find out.

First, let’s understand what Nifty EV Index is and why it was launched? This index is designed to monitor the performance of businesses in the electric vehicle (EV) sector and companies involved in the development of new-age automotive vehicles and related technologies. This index includes companies from the auto sector that produce electric vehicles, hybrid vehicles, hydrogen-based vehicles, green hybrid vehicles or are involved in business segments related to electric vehicles such as batteries, supply materials, and technology, among others.

On the occasion of the index launch, NSE stated, “The government has always been at the forefront of preparing policies related to adopting electric vehicles in the country so that India can be promoted as a manufacturing hub. This is to encourage the manufacturing of EVs with the latest technology in the country and to attract investment in this sector from reputed global EV manufacturing companies. This will boost the government’s Make in India initiative.”

Now let’s understand how much weightage each sector will have in the index? Nifty EV & New Age Automotive index includes a total of 33 companies from sectors such as auto, IT, chemicals, capital goods, oil and gas. The auto sector holds a weightage of 72.13% in this index. Companies involved in the production of 2W/3W/4W vehicles will have a maximum weightage of 8%. The maximum weightage for all other stocks will be 4%.

Which companies are included in the index? In this index, shares of giants such as Maruti Suzuki, Mahindra & Mahindra, Bajaj Auto, Exide Industries, Bosch, Ashok Leyland, CG Power, and SML Isuzu have been included. Tata Group has four companies included in this index, namely Tata Chemicals, Tata Elxsi, Tata Motors, and Tata Technologies. Additionally, Reliance Industries, LTTS, KPIT Tech, Jupiter Wagons, JBM Auto, Himadri Speciality Chemicals, and Gujarat Flurochemicals are also part of the index.

It’s also essential to know how much weightage each stock will have in the index. Bajaj Auto will have the highest weightage of 7.08%, followed by Tata Motors with 6.49%. In terms of weightage, Mahindra & Mahindra comes third with 5.83%. Similarly, Maruti Suzuki will have a weightage of 5.28%, while Exide Industries, Bosch, SML Isuzu, Ashok Leyland, CG Power, and Himadri Speciality Chemicals will have a weightage ranging from 4.28% to 4.78%.

When will the index be rebalanced? The base date for the index is set as April 2, 2018, and the base value is set at 1000. Like other NSE indices, this index will also undergo review and rebalancing based on semi-annual and quarterly basis.

Now let’s understand what significance this holds for mutual fund investors? It is believed that this new index will serve as a benchmark for fund managers. In addition to this, it will serve as a reference index for passive funds such as ETFs, index funds, and structured products. That is, based on this index, new passive funds can be launched, providing you an opportunity for investment.