Nifty Commodities Overview | Indian Indices by Motilal Oswal

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What are Nifty Commodities?

Nifty Commodities is a thematic index launched on September 07, 2011, by the National Stock Exchange (NSE). The index represents a curated list of 30 companies from the commodities segment, including sectors like metals, mining, energy, chemicals, oil and gas, cement, and sugar, among others.

As of November 29, 2024, the index's sectoral distribution was: Oil, gas, and consumable fuels: 27.74%; Metals and mining: 24.46%; Power: 22.71%; Construction materials: 16.23%; Chemicals: 7.42%; Capital goods: 1.45%.

The Nifty Commodities index is calculated using the free-float market capitalisation method and is reviewed and rebalanced semi-annually on January 31 and July 31.

What criteria are used to select Nifty Commodities stocks?

The company must be a part of the Nifty 500 index at the time of review and its business must be focused on the commodities sector.

The company's trading frequency must be at least 90% in the last six months, and it must have been listed on the exchange for at least 1 month at the time of review.

The final inclusion of the eligible companies into the Nifty Commodities stock list is done based on free-float market capitalisation, with companies having higher free-float market capitalisation preferred.

How is the value of Nifty Commodities determined?

The value of Nifty Commodities is determined using the free-float market capitalisation methodology. The formula is: Nifty Commodities Index Value = Free-Float Market Capitalisation of the Index ÷ (Base Free Float Market Capitalisation * Base Index Value), where the base index value is 1,000. Here, the capping factor for the Nifty Commodities index is 10% or 0.1.

The Nifty Commodities stock list is reviewed semi-annually and adjustments are made to ensure the index remains aligned with market movements.

Index FAQ's

The primary objective of the Nifty Commodities is to enable market participants to track the performance of the top 30 companies in the commodities segment. Additionally, the index also serves as a performance comparison benchmark for investors and mutual fund houses.

Compared to the Nifty 50, the Nifty Commodities index has a slightly higher beta of 1.04 and a lower correlation of 0.90 since the index was launched in 2011, indicating it is marginally more volatile. In terms of returns, Nifty Commodities recorded a 5-year price return of 19.99% compared to the Nifty 50's 5-year price return of 14.89%.

Investors wanting to gain exposure to Nifty Commodities can invest in mutual funds or ETFs that track the index. Alternatively, they can also directly purchase the stocks included in the index in the same proportion and weightage.

The Nifty Commodities index features the top 30 entities in terms of market capitalisation from commodity-related sectors like metals, oil and gas, chemicals, energy, mining, and cement, among others.

Since the performance of Nifty Commodities is market-linked, investing in the index through mutual funds or direct stock investments carries quite a few risks. This makes it more suitable for investors with a higher risk appetite and a long-term investment horizon.