Understanding the Nifty Commodities Index: Key Insights and Overview

The National Stock Exchange (NSE) represents various indexes comprising the listed stock market companies. Of these, the NSE commodities index is quite popular among traders and investors. 

It lists 30 popular companies dealing in the commodity sector like oil, gas, metal, etc. Traders and investors can easily track the performance of the Indian commodity market and consider it as a benchmark for investments.

Nifty Commodities Index: Characteristics

Nifty commodities index comprises 30 commodity-focused companies listed on the National Stock Exchange. These companies represent various commodity sectors like oil, petroleum products, gas, cement, power, metals, mining, and chemicals. The commodity index of NIFTY tracks the performance of these sectors and the listed companies.

The index is rebalanced twice a year. During the process of updating the index, the contribution of each company is capped at 10%. This is done to ensure no company overly influences the index and that a balanced representation is maintained across all the sectors.

The Nifty commodities index is considered a benchmark for measuring the performance of fund portfolios, launching ETFs (Exchange Traded Funds), index funds, and structured products. Not only this, analysts also refer to the Nifty commodities index to analyze market trends while investors leverage the tool to calculate potential opportunities.

What Is The Sector Representation?

The commodity index of the NSE constitutes various sectors. Each of these has a specific representation in the index. The highest allocation is for oil, gas, and consumable fuels while the lowest representation is for capital goods. It can be said that the Nifty Commodities index focuses on raw materials, industrial and infrastructure investments, and energy.

The table below gives you a quick idea of sector-wise representation in terms of percentage:

There are more than 6 sectors in the index that represent a total of 30 companies listed on the NSE. 

List Of Leading Constituents: Nifty Commodities Index

As discussed before, 30 companies from various commodity sectors make up the Nifty Commodities index. Check out the table below that showcases the leading companies in the list of Nifty Commodities index and their contribution:

The list not only includes the topmost companies of India like Tata Steel and Reliance Industries Ltd., but also various other renowned companies. These include names like Ultratech Cement Ltd., Adani Energy Solutions, Ambuja Cements, Tata Power, Indian Oil Corporation, Hindustan Petroleum, etc., are also listed in the index.

Terms to understand

You may have come across a few terms related to the what is equity and commodity market. If you are planning to participate in the commodity sector, here are a few terms you must know about:

1. P/E Ratio

Price-To-Earnings or P/E Ratio indicates the amount that investors are ready to pay for every ₹1 earning of the company.

2. P/B Ratio

It stands for Price-To-Book. The P/B Ratio indicates the number of times the index is valued in respect to its book value

3. Dividend Yield

The percentage of annual dividend return of the share price is termed as a dividend yield.

To Conclude

The commodity market is an ever-evolving sector. Strategic investment in lucrative shares can help you maximise the profit while also reducing the risk with a diverse portfolio. 

Investors and traders willing to enter the commodity market can leverage the Nifty Commodities index as a valuable tool. 

It gives you a detailed insight into the leading commodity-based companies. This segment of the market lets you capitalise on the profit made by sectors dealing in energy, infrastructure, raw materials, etc., thus, diversifying your portfolio.