Nifty Energy Index

Performance of the Nifty Energy Index vs NIFTY 50

What does the Nifty Energy Index Track?

The Nifty Energy sector index encompasses companies within the petroleum, gas, and power industries. It consists of 10 companies listed on the National Stock Exchange of India (NSE). The index is calculated using the free float market capitalization method, which means the index value reflects the total free float market value of all included stocks in relation to a specific base market capitalization. This index serves various purposes, including benchmarking fund portfolios, creating index funds, ETFs, and structured products.

Index Methodology

Eligibility Criteria for Index Inclusion

For a company to be included in the Nifty Energy Index, it must meet the following criteria:

1. Be part of the Nifty 500 at the time of review. Suppose there are fewer than 10 eligible stocks within the energy sector. In that case, additional stocks are selected from the top 800 based on average daily turnover and market capitalization over the past six months.
2. Be part of the energy sector.
3. Have a trading frequency of at least 90% in the past six months.
4. Have a minimum listing history of one month as of the cutoff date.
5. The final selection of companies is based on free-float market capitalization, ensuring no single stock exceeds 33% of the index weight, and the top three stocks do not cumulatively exceed 62%.

Index Re-Balancing and Governance

The Nifty Energy Index is re-balanced semi-annually, with the cutoff dates being January 31 and July 31 each year. This process includes giving a four-week notice before implementing changes. The NSE indices are managed by a professional team with a three-tier governance structure, comprising the Board of Directors of NSE Indices Limited, the Index Advisory Committee (Equity), and the Index Maintenance Sub-Committee.

This comprehensive approach ensures that the Nifty Energy Index remains a reliable benchmark for various financial instruments and reflects the dynamic nature of India’s energy sector.

What do the 1-year rolling returns look like?

What do the 3-year annualized rolling returns look like?

What do the 5-year annualized rolling returns look like?

How do you invest in this Index?

As of 31st May 2024, there are no mutual funds or ETFs that follow this index. However you can get exposure to this index by investing into the stocks directly as per the constituents of this index.

Index constituents

Impact of Macro-Economic Trends on Nifty Energy Index

The performance of the Nifty Energy Index, which comprises major energy companies in India, is significantly influenced by prevailing macro-economic trends. Factors such as global crude oil prices, government policies on energy, and the overall economic growth rate play pivotal roles. A surge in crude oil prices can enhance revenue for oil exploration and production companies within the index, whereas high prices might increase costs for energy-intensive sectors, potentially dampening demand.

Additionally, government initiatives promoting renewable energy and regulatory changes in the energy sector can create both opportunities and challenges for the companies in the index. Economic growth drives energy consumption; thus, robust GDP growth can lead to increased energy demand, benefiting the index. Conversely, economic slowdowns can reduce energy consumption, negatively impacting performance. Overall, the Nifty Energy Index is closely tied to macro-economic conditions, with both global and domestic trends shaping its trajectory.

Conclusion on Investing in the Nifty Energy Index

Investing in the Nifty Energy Index can be particularly beneficial during periods of strong economic growth and stable or rising energy prices. The index tends to perform well when there is high demand for energy, supported by industrial expansion and consumer growth. It is also advantageous during times when government policies favor energy sector development, including subsidies for energy companies and investments in infrastructure.

Conversely, during economic downturns or when there are significant disruptions in energy prices, the index may face headwinds. Investors looking for exposure to India’s energy sector, with its mix of traditional and renewable energy companies, might find the Nifty Energy Index a strategic addition to their portfolio. Timing investments to coincide with favorable macro-economic conditions can enhance returns, making it a compelling choice for those monitoring economic indicators and energy market trends.