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Much to the investors' surprise, the National Stock Exchange (NSE) launched FINNIFTY or Nifty Financial Services index in January 2021. The Finnifty index comprises companies catering to different segments of the financial industry.
Published on 07 February 2023
There are a total of twenty stocks in the index, each with a distinct weightage. Finnifty index decides weightage based on the company's outstanding shares' valuation on the market. Here's how to calculate the market capitalisation of outstanding/free-float shares.
In January 2021, the National Stock Exchange of India introduced FINNIFTY, which is Nifty Financial Services. It includes banks, insurance companies, housing finance, and all other companies offering financial services. The index includes a plethora of stocks with different finnifty weightage.
FINNIFTY is known to track the performance of financial institutions over time. The index can have a maximum of twenty stocks, and the weight of every stock is determined by its free float capitalization in the market.
Free float market capitalization is determined through the following formula:
Outstanding shares x investable weight factors x price / IWF
The IWF will be higher when there are more shares listed as public. The number can be figured out from the shareholding pattern reported by the company to a stock exchange.
Financial entities ensure that the economy of a country can succeed and survive. In a country like India, where the economy is constantly evolving, financial entities have a huge role to play.
Banks offer borrower’s funds acquired from surplus savings. Housing finance institutions and NBFCs facilitate credit creation and the growth of the overall economy.
While understanding “what is FINNITY,” you need to know that it helps reflect the characteristics of the different subsectors in the economy. When it comes to a single index, FINNIFTY serves as the symbol for Nifty Financial Services.
Only companies included under the Nifty 500 are eligible for Nifty Financial Services. Furthermore, investors need to remember that the base value of the index is 1000.
Let’s understand the key highlights of what Finnifty is
FINNIFTY derivatives' settlements is conducted in cash. In the case of a monthly contract, the expiry date is the expiry month's last Thursday. On the other hand, weekly contracts are subject to expiration on the expiry week's Thursday.
Key points:
Here is the list of FINNIFTY twenty companies along with their current market capitalisation.
Company name |
Industry |
Market Capitalisation |
Bajaj Finserv Ltd. |
Finance - investment |
₹200,081.9 crores |
Bajaj Finance Ltd. |
Finance - NBFC |
₹350,785.7 crores |
Housing Development Finance Corporation (HDFC) Ltd. |
Finance - housing |
₹394,581.1 crores |
Piramal Enterprises Ltd. |
Diversified |
₹45,007.2 crores |
Kotak Mahindra Bank Ltd. |
Private sector bank |
₹368,105.8 crores |
HDFC Asset Management Company Ltd. |
Finance - investment |
₹37,011.6 crores |
ICICI Lombard General Insurance Company Ltd. |
Life & health insurance |
₹59,938.3 crores |
Muthoot Finance Ltd. |
Finance - NBFC |
₹46,616.3 crores |
Shriram Transport Finance Company Ltd. |
Finance - NBFC |
₹30,748.6 crores |
SBI Life Insurance Company Ltd. |
Life & health insurance |
₹107,689.9 crores |
SBI Cards and Payment Services Ltd. |
Consumer finance |
₹70,732.1 crores |
ICICI Bank Ltd. |
Private sector bank |
₹494,294.6 crores |
Axis Bank Ltd. |
Private sector bank |
₹207,402.3 crores |
Cholamandalam Investment & Finance Company Ltd. |
Finance term lending |
₹53,484.8 crores |
HDFC Life Insurance Company Ltd. |
Life & health insurance |
₹116,462.1 crores |
ICICI Prudential Life Insurance Company Ltd. |
Life & health insurance |
₹73,002.2 crores |
State Bank of India |
Public sector bank |
₹411,335.3 crores |
REC Ltd. |
Finance term lending |
₹23,501.5 crores |
Power Finance Corporation Ltd. |
Finance term lending |
₹28,697.7 crores |
You will find several well-known and prominent stocks labeled as FINNIFTY stocks. HDFC Bank is known to hold the maximum weightage under this index. Look at the list of the top ten FINNIFTY weightage stocks:
Finnifty assists investors in the following ways.
This index serves as a benchmark for investors. Earlier, if your portfolio consists of financial sector equities, you have two options for comparison: the BSE Sensex and the Nifty50. But, with the launch of Finninfty, you now have a specialised financial sector index to evaluate the performance of your stocks.
Alternatively, professional investors like to purchase all 50 companies' stocks displayed on the index in a similar weightage. However, FINNFITY places the heavily weighted stock first. The weightage continues to decrease as you move down.
You can put your money into mutual funds that track the index's stocks. Some of the schemes whose portfolio comprises Finnifty stocks are Invesco India Financial Services Funds, ABSL Banking and Financial Services Fund, and Sundaram Financial Services and Opportunities Funds.
You may choose stocks from the Finnifty index and trade futures and options for such stocks. The expiry date and fee both will be mentioned on the contract.
No investor can directly purchase the index. But they are allowed to invest via mutual fund schemes that have a weightage equal to FINNIFTY’s results.
Investors willing to purchase the FINNIFTY index should buy 20 stock constitutions according to the mentioned weightage. An alternative includes purchasing the Nifty Bees. The Nifty Bee is the ETF on the index known to replicate its performance.
The key benefit of investing in FINNIFTY is the way it helps with reducing the non-systematic risk. It can include financial as well as business risks. Events like strikes, declining revenues, low-profit margins, and increased financial costs are all factors contributing to non-systematic risks. But diversifying the risks is quite easy by investing in multiple companies.
Banks are known to represent a weightage of 63.1% of FINNIFTY. They represent 20.3% of the Nifty 500 Index and 26.5% of the Nifty 50 Index. On the other hand, banks represent 100% of the Nifty Bank Index.
When it comes to insurance companies, they have a weightage of 8.0% in FINNIFTY. They also weigh 2.5% in the Nifty 500 and Nifty 50.
The subsectors gain more prominent exposure by this particular index than broad market indices. This index offers a more targeted approach to investors who are on the hunt for certain sectors.
Additionally, the approach of the index toward different sectors of the economy is quite diverse. Other indexes, like the Nifty Bank Index, are not that diversified.
Finnifty and Nifty50 have both similarities and distinctions between them. A handful of differences are pointed out below.
Since its inception, the Finnifty index has shown decent performance. It has outperformed both Nifty Bank and Nifty 50 since its launch. The CAGR of Finnifty is 18.7%, while Nifty 50 and Nifty Bank reported a CAGR of 13.9% and 16.9%, respectively. Finnifty can help you earn decent returns if you have a diverse portfolio and a basic understanding of market volatility.
We care that you succeed
Bringing readers the latest happenings from the world of Trading and Investments specifically and Finance in general.