The electric vehicle (EV) revolution is well underway, and India is stepping up to the challenge by launching its first-ever EV index.
Introducing the Nifty EV & New Age Automotive Index by NSE Indices Limited, a subsidiary of the National Stock Exchange of India.
This index is a significant step towards tracking the performance of businesses within the EV sector and fostering investment opportunities in this rapidly growing market. Let’s dive into what this new index entails and why it matters.
What is the Nifty EV & New Age Automotive Index?
The Nifty EV & New Age Automotive Index is designed to monitor companies involved in the electric vehicle ecosystem and developing advanced automotive technologies. This includes EV manufacturers, electric battery producers, and companies supplying raw materials or components for EVs and autonomous vehicles.
The base date for the index is April 2, 2018, with a starting value of 1000.
Key features of the EV Index
Reconstitution and rebalancing
The index will be reconstituted semi-annually and rebalanced quarterly. This ensures that the index remains relevant and accurately reflects the dynamic EV market. The frequent updates help in maintaining the index’s accuracy in tracking the performance of the included companies.
Sector representation
The Nifty EV & New Age Automotive Index offers a diverse sector representation:
- Automobile and Auto Components: 72.13%
- Information Technology: 11.31%
- Chemicals: 10.63%
- Capital Goods: 6.39%
- Oil, Gas & Consumable Fuels: 3.37%
- Consumer Services: 0.18%
Top constituents
| Company | Weightage (%) | 1 Year Return (%) |
| Bajaj Auto Ltd. | 7.08 | 95.62 |
| Tata Motors Ltd. | 6.49 | 78.10 |
| Mahindra & Mahindra Ltd. | 5.83 | 88.75 |
| Maruti Suzuki India Ltd. | 5.28 | 31.63 |
| Exide Industries Ltd. | 4.78 | 135.65 |
| Bosch Ltd. | 4.56 | 64.06 |
| Samvardhana Motherson International Ltd. | 4.45 | 91.57 |
| Eicher Motors Ltd. | 4.42 | 27.36 |
| CG Power and Industrial Solutions Ltd. | 4.30 | 68.85 |
| Himadri Speciality Chemical Ltd. | 4.28 | 166.77 |
These companies represent a diverse mix of automotive and industrial leaders, highlighting the multifaceted nature of the EV market.
Investment fundamentals
For those considering investing in the Nifty EV & New Age Automotive Index, here are some key metrics:
- Dividend Yield: 0.72%
- Price-to-Earnings (P/E) Ratio: 33.07
- Price-to-Book Ratio: 6.09
These figures suggest a high-growth sector, though with higher valuations, typical for innovative and emerging industries.
Enhancing EV market transparency
The introduction of the Nifty EV & New Age Automotive Index also brings greater transparency to the EV market. Investors can now better understand how different companies within the EV ecosystem are performing, which can guide more informed investment decisions.
This transparency is crucial for fostering trust and encouraging more widespread investment in the sector. Additionally, as passive funds track the index, it will likely attract more capital into the EV market, further driving innovation and development.
By offering a reliable benchmark, the index helps demystify the EV sector, making it more accessible to a broader range of investors, from seasoned professionals to newcomers looking to capitalise on the electric vehicle boom.
The broader picture
Alignment with government policies
The launch of the Nifty EV & New Age Automotive Index aligns with the Indian government’s push for EV adoption and manufacturing. The government’s policies aim to make India a hub for EV manufacturing, attract global investments, and support the Make in India initiative. India will become one of the world’s major EV markets by 2030.
The index serves as a benchmark for asset managers and a reference for passive funds like Exchange Traded Funds (ETFs), index funds, and structured products.
Opportunities for investors
The index provides a structured way for investors to participate in the EV boom. By tracking a diverse set of companies within the EV ecosystem, it offers exposure to various segments of the market, from manufacturers to technology providers. This diversified approach can help mitigate risks associated with investing in individual stocks.
Facilitating innovation and growth
The Nifty EV & New Age Automotive Index is more than just a financial instrument; it’s a reflection of the innovation and growth within the EV sector. By highlighting key players and their contributions, the index promotes a deeper understanding of the industry’s landscape and encourages further development and investment in EV technologies.
Conclusion
The launch of India’s first Electric Vehicle Index marks a significant milestone in the country’s journey towards a sustainable automotive future. The Nifty EV & New Age Automotive Index not only tracks the performance of the EV sector but also provides a valuable benchmark for investors.
With a robust reconstitution and rebalancing mechanism, diverse top constituents, and alignment with national policies, this index is poised to play a crucial role in driving investments and growth in India’s EV industry.
This index offers a compelling opportunity for millennials and Gen Z looking to invest in the future of transportation.
