National Stock Exchange Indices Limited (NSE Indices Ltd) has expanded its index offerings with the launch of a new broad market index, the Nifty Smallcap 500. The organisation announced on Friday that the new index will track the performance of the country’s top 500 small-cap companies, offering a wider view of this segment of the equity market.
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Inside NSE’s framework for Nifty Smallcap 500 index
NSE stated that the 500 small-cap stocks included in the index have been selected based on their average market capitalisation over six months, following the Nifty Midcap 150. The weight of each stock in the index will be determined by its Free Float Market Capitalisation (FFMC). This means that only shares available for trading in the market will be considered while calculating the weight of a stock.
FFMC is calculated by multiplying the current market price of a share by the number of shares available for trading. According to NSE, this methodology will allow the index to reflect the actual market situation more accurately.
The statement further noted that the base date of the Nifty Smallcap 500 index has been fixed as April 1, 2005, with a base value of 1,000. The index will be reconstituted twice every year, in March and September.
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Nifty Smallcap 500 as a market benchmark
The National Stock Exchange said the new index is expected to serve as an important benchmark for asset managers going forward. It also indicated that passive investment products such as exchange-traded funds (ETFs), index funds and structured products may be launched based on this index.
NSE already manages the Nifty Smallcap 250, Nifty Smallcap 100 and Nifty Smallcap 50 indices. The newly introduced Nifty Smallcap 500 is expected to provide a broader and more comprehensive representation of the small-cap segment of the market.
