Nifty Pharma

The Nifty Pharma Index comprises 20 pharmaceutical companies listed on the NSE, serving as a benchmark for the sector's performance in India's stock market. It reflects trends, investor sentiment, and overall growth within the pharmaceutical industry, helping investors assess market movements and make informed decisions. This index provides insights into the financial health of leading pharma firms, offering a comprehensive view of the sector’s stability and potential. By tracking price fluctuations and market capitalisation, it aids in evaluating investment opportunities within the pharmaceutical domain on the NSE.

NIFTY Pharma is a sectoral index on the NSE that tracks the pharmaceutical sector’s performance in India. Initially comprising 10 stocks, it expanded to 20 exchange-listed pharma stocks from 30 September 2021. Eligible industries include Biotechnology and Pharmaceuticals. Launched on 1 July 2005 with a base date of 1 January 2001 and a base value of 1,000, it has surpassed 12,000 at ~36 P/E multiples. Reconstituted semi-annually, it reflects industry trends. Managed by NSE Indices Limited, it follows a three-tier governance structure. A variant of this index is the NIFTY Pharma Total Returns Index.

The NIFTY Pharma share price is calculated by weighting its 20 stocks based on periodically capped free-float market capitalisation relative to a base market cap in real time. To be included, a stock must be NSE-listed, part of NIFTY 500, and belong to the pharmaceutical sector. If fewer than 20 stocks qualify, additional stocks are selected from the top 800 based on turnover and market cap. Eligible stocks must have 90% trading frequency and a six-month listing history (three months for IPOs). They should preferably trade in NSE’s F&O segment and adhere to a cap of 33% for a single stock and 62% for the top three cumulatively.

Index Value = Current Market Capitalisation / (Base Market Capitalisation × Base Index Value).

The NIFTY Pharma index is reconstituted semi-annually based on six months of data, with cutoff dates on 31 January and 31 July each year. Any stock replacements, if required, take effect from the last trading day of March and September, with a four-week prior notice issued to the market.

The NIFTY Pharma Index is a sector-specific benchmark on India’s National Stock Exchange (NSE), designed to track the performance of the pharmaceutical industry. Comprising top pharmaceutical companies, it provides insights into market trends, sector growth, and investor sentiment. This index serves as a key indicator of the industry's financial health, helping investors assess opportunities in the Indian pharmaceutical sector.

• Diversification: Investing in a NIFTY Pharma ETF provides exposure to multiple pharmaceutical stocks, reducing risks linked to individual stock selection.

• Growth potential: With rising demand in healthcare, India’s pharma sector offers long-term growth, making these ETFs attractive for investors seeking sustained returns.

• Liquidity: Like all ETFs, NIFTY Pharma ETFs are tradable on stock exchanges, offering flexibility, liquidity, and lower expense ratios than active mutual funds.

• Transparency: Regular disclosures allow investors to track holdings, enhancing trust and encouraging investments.

The NIFTY Pharma Index was introduced on 9 November 2015 by the National Stock Exchange of India (NSE) as a dedicated benchmark for the pharmaceutical sector. Designed to track the performance of leading pharma companies, it quickly became a key indicator of sector trends and growth. The index follows the free-float market capitalisation-weighted methodology, considering only publicly traded shares while calculating market value. This approach ensures a more accurate representation of the sector’s performance by reflecting real market dynamics. Since its launch, the NIFTY Pharma Index has played a crucial role in assessing investment opportunities in India's pharmaceutical industry.