Nifty Commodities

What are Nifty Commodities?

Nifty Commodities is a stock market index that tracks how companies in the commodities sector are performing in India. In simple words, it tracks the overall performance of businesses involved in essential goods such as oil, metals, power, cement, and chemicals. If you're planning to open demat account online, understanding indices like Nifty Commodities can help you make more informed investment decisions.

The NIFTY Commodities index comprises 30 companies across five key sectors of the economy: Oil, Gas and Consumable Fuels, Metals and Mining, Construction Materials, Power, and Chemicals. It provides investors with insights into the performance, strength, and trends of the commodity market. Owned and managed by NSE Indices Limited, formerly India Index Services & Products Limited, the index offers a comprehensive, real-time view of how India’s leading commodity-related companies are performing.

Selection Criteria for Nifty Commodities Stocks?

To be included in the Nifty Commodities index, companies must meet certain rules. These rules ensure that only strong, active companies are included on the list.

Here are the main conditions:

• The company must be listed on the National Stock Exchange.
• It should be part of the Nifty 500 index.
• The company must belong to the commodities sector.
• Should comprise a minimum of 10 stocks.
• If fewer than 10 companies qualify, the remaining ones are selected from the top 800 ranked companies based on trading activity and size.
• Each company’s weight in the index is capped at 10% to maintain balance.
• A company must have traded for at least 90% of the days in the past six months.
• Newly listed companies can also be included if they meet all requirements for at least three months.

This selection process ensures that the Nifty Commodities index truly reflects India’s most significant commodity-based businesses.

Understanding the Calculation of Nifty Commodities

The Nifty Commodities index is calculated using something called free-float market capitalisation.

Let’s break this down:

• Market capitalisation means the total market value of a company’s shares. It is calculated by multiplying the current share price by the total number of shares.
• Free-float refers to only those shares available for public trading (not held by promoters or the government).

The formula used to calculate the index value is:

Index Value = Current Index Market Capitalisation / (Base Market Capitalisation × Base Index Value)

This calculation shows the overall performance of all 30 companies in the index. The Nifty Commodities index is reviewed and updated twice a year, in March and September. Companies can be added or removed based on their performance during the review period.