NCDEX launches NDEX and FINNDEX to expand into equity benchmarks

NCDEX has launched NDEX and FINNDEX, two equity benchmarks tracking 20 large, liquid Indian stocks and 15 financial sector companies. Their multi-factor methodology incorporates market capitalisation, trading activity, beta and volatility, with semiannual rebalancing.

NCDEX has entered the equity market benchmark space with the launch of two indices, NDEX and FINNDEX, as the exchange expands beyond its traditional commodities business into equities and equity derivatives.

The indices, designed to track large and liquid Indian stocks and the financial services sector, respectively, use a multi-factor methodology that combines free-float market capitalisation, trading activity, beta and volatility, moving beyond a market-capitalisation-only approach to stock selection and weighting.

NDEX comprises 20 large and liquid Indian equities selected from the top 60 NSE-listed companies, while FINNDEX tracks 15 financial sector stocks, excluding insurance companies, selected from the top 40 eligible companies.

The launch marks a milestone in NCDEX's transition towards a multi-segment exchange, broadening its market-infrastructure offering as India's capital markets attract greater investor participation.

Both indices use a composite scoring framework in which free-float market capitalisation and average daily traded value carry weights of 30% each, while beta and volatility account for 20% each. The methodology seeks to capture company size, liquidity and market behaviour in selecting and weighting constituents.

The final constituent weights combine free-float market-capitalisation weights and composite-score weights equally. Individual stocks are capped at 15% at each rebalancing to limit concentration risk and improve diversification.

The indices will be reviewed and rebalanced twice a year, in March and September, with provisions for ad-hoc reconstitution under specified circumstances. Both have January 2010 as their base month and a base value of 10,000.

NCDEX owns the indices, while

NSE Indices Ltd will calculate and maintain them. Index values will be disseminated in real time during market hours through NCDEX's data feeds, website and periodic factsheets.

Commenting on the launch, Vikas Goel, MD and CEO of NCDEX, said the rollout of NDEX and FINNDEX was an important milestone in the exchange's transition into a multi-segment institution.

"Our expansion into the equity and equity derivatives segment is a part of our vision to build a broader market institution that responds to the changing needs of India's financial ecosystem," Goel said.

He added that transparent and well-designed benchmarks would become increasingly important as Indian capital markets deepen and attract greater domestic and international participation. The indices, he said, aim to support informed investment decisions and expand the tools available to market participants.

Tojo Banerjee, chief of equity business at NCDEX, said the indices offer a differentiated approach to index construction by looking beyond market capitalisation to incorporate factors that influence stock selection and market behaviour.

FINNDEX, in particular, is designed to reflect the expanding diversity of India's financial ecosystem, including capital markets, non-banking financial companies (NBFCs) and fintech businesses, alongside traditional banking.

While NDEX provides a benchmark for large and liquid Indian equities, FINNDEX offers a sector-specific measure of financial companies.

The indices could serve as reference points for investors, market participants and researchers seeking to assess the performance of the broader equity market and the financial sector. Their longer-term role will depend on market adoption and how participants use them as benchmarks and potential building blocks for investment products.