The Indian information technology sector includes businesses involved in software development, IT services, hardware and technology infrastructure. Following every company separately can be difficult. The Nifty IT index brings together 10 listed IT companies to provide a focused view of how this part of the market is performing.
It is a sectoral index, not a broad-market index. Its movement is shaped mainly by the business environment for IT companies, including client technology spending, currency movement and company earnings.
Table of Contents
What is the Nifty IT index?
The Nifty IT index is a sectoral index designed to reflect the performance of companies engaged in activities such as software development, hardware and IT infrastructure. It includes 10 companies listed on the NSE.
The index offers a snapshot of how its constituent companies are moving in the stock market. It can be used as a benchmark for portfolios with IT exposure and as an underlying index for products such as index funds and ETFs.
Key Takeaways
- The Nifty IT index comprises 10 information technology companies listed on the National Stock Exchange.
- It uses a periodic capped free-float market capitalisation methodology and is calculated in real time.
- No single stock can exceed 33% weight at rebalancing, while the top three stocks together are capped at 62%.
- The index is reviewed semi-annually, using January 31 and July 31 as review cut-off dates.
- Investors cannot buy the index directly but may access it through index funds, ETFs, individual stocks and derivatives.
Nifty IT companies and their weightings
The Nifty IT index composition changes after periodic reviews. According to the latest official factsheet, the 10 constituents and their weights are:
| Company | Weight (%) |
| Infosys Ltd. | 29.23 |
| Tata Consultancy Services Ltd. | 20.29 |
| HCL Technologies Ltd. | 11.93 |
| Tech Mahindra Ltd. | 10.84 |
| Persistent Systems Ltd. | 6.23 |
| Coforge Ltd. | 6.19 |
| Wipro Ltd. | 5.14 |
| LTM Ltd. | 4.19 |
| MphasiS Ltd. | 3.21 |
| Oracle Financial Services Software Ltd. | 2.76 |
The weight of a company reflects its free-float market capitalisation, subject to the index caps. Larger constituents can therefore have a greater influence on the index’s movement.
Please note that the reference to any industry/sector/stock is provided for illustrative purposes only. This should not be construed as a research report or a recommendation to buy or sell any security or sector.
Source: NSE Indices Limited, Nifty IT factsheet.
What does Nifty IT price mean?
The term Nifty IT price generally refers to the current level of the Nifty IT index. It is not the share price of one company. The index level changes during market hours as the prices of its constituent stocks move. Investors can check the latest Nifty IT value on the official Nifty Indices website.
How is the Nifty IT index calculated?
The Nifty IT index uses the periodic capped free-float market capitalisation method. Free-float market capitalisation considers shares that are available for public trading rather than all shares issued by a company.
At a high level, the calculation is:
Index value = (Current free-float market capitalisation / Base market capitalisation) x Base value
The index has a base date of January 1, 1996. Its original base value of 1,000 was revised to 100 with effect from May 28, 2004.
The calculation is adjusted for corporate actions such as stock splits, bonus issues and rights issues to maintain continuity in the index value.
Source: NSE Indices Limited, Nifty IT factsheet.
Nifty IT price return and total return index
A price return index reflects changes in the prices of constituent stocks. A total return index also accounts for dividends, assuming they are reinvested.
The official factsheet identifies the Nifty IT Total Returns Index as the index variant. This can be useful while comparing the performance of an index fund or ETF with its benchmark, as a fund’s returns may be measured against the total return version of an index.
Source: NSE Indices Limited, Nifty IT factsheet.
How are companies selected for the Nifty IT index?
Companies must meet defined eligibility conditions before they can be selected for the index.
- They should generally form part of the Nifty 500 at the time of review.
- They must belong to the IT sector under NSE Indices’ industry classification.
- Their trading frequency should be at least 90% over the previous six months.
- They should have a minimum listing history of one month as of the review cut-off date.
- The final 10 companies are selected based on free-float market capitalisation, with preference given to stocks available in NSE’s futures and options segment.
If fewer than 10 eligible IT companies are available within the Nifty 500, the required number may be selected from a wider universe based on average daily turnover and average daily full market capitalisation.
Source: NSE Indices Limited, Nifty IT factsheet.
How often is the Nifty IT index rebalanced?
The Nifty IT index is reviewed and rebalanced semi-annually. The review cut-off dates are January 31 and July 31, and the review considers average data for the preceding six months. NSE Indices provides four weeks’ notice before changes take effect. This process helps keep the index aligned with eligible companies in the IT sector.
Source: NSE Indices Limited, Nifty IT factsheet.
How can investors access the Nifty IT index?
Investors cannot buy the index itself. They can choose among different routes based on their investment approach and the level of involvement they are comfortable with.
Index funds
Index funds that track the Nifty IT index aim to replicate its composition and performance, subject to tracking difference and scheme-related factors.
Exchange traded funds
ETFs that track the index are bought and sold on a stock exchange through a demat and trading account, and their market price may differ from their net asset value.
Individual stocks
Investors can buy shares of individual constituent companies, although this does not automatically replicate the index and can create higher company-specific exposure.
Futures and options
Nifty IT futures and options are exchange-traded derivative contracts that require an understanding of margins, expiry, market movement and the risks involved.
What to consider before investing in the Nifty IT index
The Nifty IT index can provide focused sector exposure, but it should be assessed differently from a broad-market index.
Sector concentration
All 10 constituents belong to the IT sector, so an industry slowdown may affect the index more sharply than a diversified market index.
Global revenue exposure
Many Indian IT companies serve international clients, which means overseas technology spending and currency movement can affect their earnings and share prices.
Constituent concentration
The index holds only 10 stocks, and larger companies have a greater influence on its movement even though the methodology applies individual and top-three weight caps.
Investment costs and tracking difference
Before selecting an index fund or ETF, investors may review its expense ratio, tracking difference, liquidity and suitability for their investment horizon.
Portfolio fit
An investment linked to the Nifty IT index should be considered in the context of the investor’s goals, time horizon, risk appetite and existing investments.
How does Nifty IT differ from Nifty 50 and other sectoral indices?
The Nifty IT index focuses only on information technology companies. The Nifty 50 is a broad-market index that includes companies from several sectors, such as financial services, consumer goods, energy and healthcare.
Other sectoral indices follow their respective industries. For example, Nifty Bank tracks banking companies, while Nifty Pharma tracks pharmaceutical companies. The Nifty IT index is therefore influenced mainly by IT-sector conditions.
Factors that can influence the Nifty IT index
Several factors can influence the movement of the index and its constituents:
- Global demand for software, consulting, cloud services and outsourcing
- Earnings growth, margins and deal activity of constituent companies
- Movement in the rupee against major foreign currencies, particularly the US dollar
- Technology budgets in key overseas markets
- Domestic and global interest-rate conditions
- Foreign institutional investment flows and broader market sentiment
- Changes in constituent weights after the semi-annual review
FAQs
How many companies are in the Nifty IT index?
The Nifty IT index comprises 10 information technology companies listed on the NSE.
Can I buy Nifty IT directly?
No. Investors cannot buy the index directly, but they may access it through index funds, ETFs, individual stocks or derivative contracts.
What is the objective of Nifty IT?
The Nifty IT index is designed to reflect the performance of companies engaged in information technology activities, including software development, hardware and IT infrastructure.
How can I stay updated on Nifty IT sector performance?
Investors can follow the live index level, factsheet, constituent details and other official updates on the Nifty Indices website.
How often is the Nifty IT index rebalanced?
The index is reviewed and rebalanced semi-annually, with January 31 and July 31 serving as the review cut-off dates.
What is the base date and base value of the Nifty IT index?
The base date is January 1, 1996; its original base value of 1,000 was revised to 100 with effect from May 28, 2004.
Can beginners invest in the Nifty IT index through mutual funds or ETFs?
Investors may access the Nifty IT index through index funds or ETFs, but these products provide sector-specific exposure and should be considered in line with individual investment goals and risk appetite.
Are Nifty IT options available?
Yes. Nifty IT options are available on the NSE, subject to prevailing contract specifications and exchange terms.
Source: National Stock Exchange of India, Nifty IT F&O.
