Nifty’s changing face

Remember Nagarjuna Fertiliser & Chemicals? The fertiliser stock was at one time a market-moving bellwether, forming a part of the Nifty index at the time of its inception. Fellow index-mates then were yesteryear favourites such as MRPL, Chambal Fertilisers, Madras Refineries (now CPCL), IPCL, Kochi Refineries, IFCI and GE Shipping.

The Nifty index was launched in April 1996, with its base date set to November 5, 1995. Since then, the index has delivered an annual return of 9.6 per cent.

Those staying put The year 1996 was also among the years that saw more active churning in Nifty components, with six stocks being replaced. The then Hero Honda Motors, Apollo Tyres, and the two fertiliser companies were some stocks that bowed out in the Nifty’s first re-jig. Instead ABB, East India Hotels and M&M found their way into the index; 1998, 2002, and 2007 were other years of more index replacements.

In all this mixing up of the Nifty through time, 13 stocks have never been replaced at any point. One is, of course, Reliance Industries, despite its sporadic mergers and acquisitions. Its weight in the index now at 7 per cent (free-float market cap) is little changed from the 6.6 per cent (full float) in April 1996.

The other stalwart is SBI, which in fact had the heaviest index weight of 8.3 per cent (full float) in 1996. Others are Hindustan Unilever and ITC. The not-so-obvious ones which stayed put are Hindalco Industries, Ranbaxy Labs, ACC and Ambuja Cements. Three Tata stocks — Tata Steel, Tata Power, and Tata Motors — have also always been a part of the Nifty.

In 1996, consumer-themed stocks — auto, hotels and FMCG — held a weight of 24 per cent in the index. Now, it’s 22 per cent. But exclude champion ITC and the consumer stocks’ collective weight drops to just 11 per cent. bowing to service

The might of the services industry has grown over the years, with the entry of sectors such as software and telecom. Banking, finance, telecom and software together account for 42 per cent of the Nifty weight now. In contrast, services held just about 27 per cent at inception.

The rising influence of the service sector has come at the cost of manufacturing. Sectors such as fertilisers, steel, metals, textiles, and tyres have either seen their weights drop, or completely disappear over the years.

With both Indian Rayon and Arvind Mills booted out in 1999, Grasim is the textile industry’s only index representative now. Indian Aluminium Co exiting in 1996, Essar Steel and Indo Gulf Corp following it in the next two years drastically reduced the weight of the steel and metals sectors.