When people ask “what is Nifty”, they are usually referring to the National Stock Exchange’s benchmark index, which is the Nifty 50. However, the Nifty universe comprises many indices beyond the Nifty 50, each representing different market capitalisations, sectors and more. Among these is the Nifty Auto Index, a sector barometer that tracks listed automobile and auto component companies. It helps investors see how the auto ecosystem is doing and offers ways to get a diversified, rules-based exposure to the theme through index funds or a Nifty ETF (Exchange Traded Fund) based on the Nifty Auto Index.
In addition to the auto space, the Nifty family also maintains sectoral indices such as Nifty Bank, Nifty IT, and Nifty Pharma. These allow investors to track specific industries in a transparent, rules-driven manner, and Nifty Auto is one such focused benchmark.
What is the Nifty Auto Index?
The Nifty Auto Index is a sectoral index designed to reflect the performance of India’s automobile value chain, including passenger vehicles, two wheelers, commercial vehicles, ancillaries, tyres, and related businesses. It is built and maintained using the standard Nifty methodology (free float market cap weighting) applied to companies classified in the auto universe. This means that companies get weightage relative to the number of shares they have made available to the public.
The index comprises 15 constituents.
Read Also: What is Nifty: Meaning, Eligibility, Calculation and Benefits
Nifty auto stocks selection criteria
While the exact mechanics are overseen by the index provider, various studies on the index establish these steps:
- Eligible companies are typically drawn from the top 500 by average free float market capitalisation and aggregate turnover over the last six months.
- Trading frequency of at least 90% over the prior six months is expected.
- Positive net worth is required.
- A listing history of six months is the normal rule; IPOs may be considered with a shortened look-back if other conditions are met.
- Final selection targets 15 companies by free float market cap, and the index is reviewed semi-annually.
Features of the Nifty Auto Index
Some of the characteristic features of the Nifty Auto Index are:
- Sector specific, rules-based basket: You get diversified exposure to multiple auto sub-segments without picking individual stocks. The basket size is 15 companies as per current methodology summaries.
- Free float market cap weighting: Larger, more liquid companies receive higher weights, so the index automatically reflects changes in market leadership.
- Periodic review: Constituents are re-evaluated semi-annually, helping keep the basket aligned with liquidity and size screens.
- Cyclical sensitivity: The sector can be influenced by interest rates, fuel prices, credit availability, and income growth, among other factors.
Another useful aspect is that the index can serve as a benchmark. Fund managers and analysts may compare sector-focused funds or portfolios against Nifty Auto to judge relative performance. For investors, this may make it easier to see whether an auto-themed strategy is underperforming or outperforming the broader market.
How to buy the Nifty Auto Index?
You can take exposure in two common ways:
- Sectoral index funds: These are mutual funds that aim to replicate the Nifty Auto Index by holding its constituents in similar weights. You invest at NAV (Net Asset Value) through the fund house or distributors.
- Exchange traded funds (ETFs): A Nifty ETF tracking the auto index trades on stock exchanges during market hours. You buy or sell through a demat and trading account at market price. Indian exchanges list sectoral ETFs that track the auto index.
For investors who prefer disciplined contributions, some index funds linked to Nifty Auto may also allow systematic investment plans (SIPs). While ETFs are bought intraday like shares, SIPs in mutual funds let retail participants spread out exposure over time, potentially reducing timing-related concerns.
Things to know before investing in the Nifty Auto Index
- Concentration risk: This is a single sector exposure; performance may differ widely from broader markets during upcycles or downcycles.
- Cyclical drivers: Auto sales often track credit conditions and fuel costs; macro shifts may move the index meaningfully over short windows.
- Review and changes: With semi-annual rebalancing, names and weights can change.
- Taxation (current rules): For equity oriented mutual funds (including many sectoral index funds and ETFs), STCG (Short-Term Capital Gains) is 20% and LTCG (Long-Term Capital Gains) is 12.5% on gains, with a Rs. 1.25 lakh annual LTCG exemption on listed equity or equity mutual fund gains; rules apply to assets sold on or after July 23, 2024. Tax law can change; it is advised to confirm the latest slabs and dates before transacting.
Read Also: SGX Nifty: Definition, Meaning, Advantages and Its Impacts
Conclusion
The Nifty Auto Index offers a rules-based, diversified way to participate in India’s automobile theme. Understand that it is a concentrated sector play, sized at 15 stocks, reviewed semi-annually, and it follows free float market cap weighting. All of this can shape how the index behaves and how closely a fund can mirror it. If you are an interested investor, you may consider combining an informed view of the auto cycle with attention to costs, liquidity, tracking, and the current tax rules before deciding if this exposure may be suitable in your portfolio.
FAQs
How many stocks are in Nifty Auto?
There are currently 15 stocks in Nifty Auto.
What is the return of the Nifty Auto Index?
Index performance numbers can change daily and past performance may or may not be sustained in future.
Is there any ETF for Nifty Auto?
Yes. There are sectoral ETFs tracking the Nifty Auto Index, information about which can be found on the NSE indices website.
How many stocks are in the Auto sector?
The auto sector universe includes many listed companies across passenger vehicles, two wheelers, commercial vehicles, ancillaries, and tyres, and the count changes over time. Investors often use the Nifty Auto Index’s 15-stock basket as a sector gauge.
What is the meaning of Nifty Auto?
It’s the auto sector index within the Nifty family, a rules-based, free float market cap weighted benchmark tracking listed auto-related companies.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.
The content herein has been prepared on the basis of publicly available information believed to be reliable. However, Bajaj Finserv Asset Management Ltd. does not guarantee the accuracy of such information, assure its completeness or warrant such information will not be changed.The tax information (if any) in this article is based on current laws and is subject to change. Please consult a tax professional or refer to the latest regulations for up-to-date information.
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