What is Bank Nifty Index?
Nifty Bank index is weighted index of Indian banking stock companies that are largely capitalized and fairly liquid.
It’s a portfolio of 12 Indian banking companies that shows the performance of included banks. Bank Nifty index includes both Private Sector banks and Public Sector banks.
Bank Nifty index is also known as “Nifty Bank”. In the year 2000, India Index Service and Product Limited (IISL) launched the index. 1st January, 2000 is the base date of the index with having base value of 1000 points.
The index was made to help the investors and other intermediaries to make better decisions by showing the benchmark of Indian capital market economy by showing their performance.
Computation & Trading in Bank Nifty Index
Nifty Bank is computed by free-float capitalization method.
Nifty Bank is traded frequently in both future and options market. It is highly liquid due to it’s high weightage in Nifty Index. It has a positive relation with Nifty Index.
For trading purpose, the current lot size of Nifty Bank is 20 units.
It was the first ever index that was traded weekly in the options market and now it has higher trading volume than nifty index.
Stock Selection in Bank Nifty Index
There are some criteria for selection of banking stocks in Bank Nifty index set up by NSE.
- Market Capitalization Rank
The selected bank should have market capitalization rank should be less than 500 in the universe.
- Turnover Rank
The selected bank should have turnover rank should be less than 500 in the universe.
- Trading Frequency
In the last six months, the trading frequency of the selected bank should be minimum 90%.
- Net Worth
Net worth of the selected bank should be positive.
- Listing History
The selected bank should have 6 months listing history in the stock exchange except in the case where the bank is coming with an IPO, and then it should have 3 months listing history.
- Futures & Options Segment
A bank company will be included in the bank nifty index only if it is traded in F&O (Futures & Options Segment).
- Free-Float Capitalization
Final Selection of 12 companies that will be included on the basis of free-float market capitalization method.
- Weightage
Each banking stock will have their weights in the index. No single bank shall have more than 34% share.
Further, weightage of top 3 banks combined should not be more than 63% while re-balancing.
- Re-Balancing
Nifty Bank index is re-balanced on half yearly basis on 1st January and 1st July.
Average data is considered for 6 months for re-balancing. Four weeks prior notice is informed to the market after such change.
- Governance
Nifty Bank index is governed by three-tier teams.
- Board of Directors of NSE Indices Limited.
- The Index Advisory Committee (Equity).
- The Index Maintenance Sub-committee.
Bank Nifty Stock Companies List with weightage
Below is the list of Companies that are included in Bank Nifty Index including their weightage as released by NSE India on August 1, 2020 on basis of closing prices of July 31, 2020.
- HDFC Bank – 26.68%
- ICICI Bank – 18.70%
- Kotak Mahindra Bank – 16.66%
- Axis Bank – 14.77%
- State Bank of India (SBI) – 11.14%
- IndusInd Bank – 4.79%
- Bandhan Bank – 2.11%
- Federal Bank – 1.63%
- RBL Bank – 1.19%
- Bank of Baroda – 0.85%
- IDFC First Bank Ltd. – 0.85%
- Punjab National Bank (PNB)- 0.64%
HDFC Bank has the highest weightage having 26.68% weightage in Bank Nifty Stock Companies index List, whereas ICICI Bank remains at second having 18.70% weightage & Kotak Mahindra Bank on third having 16.66% in Bank Nifty Companies Index List.
HDFC Bank, ICICI Bank & Kotak Mahindra Bank are also called bank nifty heavy weights stocks.
Punjab National Bank (PNB) has the least weightage in Bank Nifty Index with 0.64%.
There was exclusion of Yes Bank in the Bank Nifty Index on March 19, 2020. Bandhan Bank has been included in Bank Nifty Index.
Bank Nifty Lot Size
As per the circular Ref. No. 91/2018 dated September 28, 2018 issued by National Stock Exchange India Ltd, Bank Nifty Lot Size for futures & Options Contract has been revised to 20 units from 40 units.
Bank Nifty Live Chart
Check the Bank Nifty Live Chart for current index spot price.