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Nifty Auto is an NSE Indices sectoral index that reflects the performance of automobile sector companies listed on the National Stock Exchange (NSE). It comprises companies dealing with the manufacture of two-wheelers, passenger cars, commercial vehicles, tractors, and auto parts. The 15 companies chosen from the sector are based on their free-float market cap and liquidity. Nifty Auto serves as a reference for monitoring the performance of the Indian auto sector. It is extensively utilized by fund managers, analysts, and investors to comprehend the movement of the sector and ascertain trends impacting automobile firms in the Indian equity space.
NSE Indices launched the Nifty Auto index to offer a systematic means of gauging automobile firms listed on the NSE. Its launch enabled the market to track the performance of the auto industry independently of large indices such as the Nifty 50. The index provides a concentrated perspective of firms involved in vehicle manufacturing, production of auto parts, and distribution.
Initially introduced with a base year of 2003 and base value of 1000, the index has changed in composition over time as the industry has itself undergone changes. With developments like electric vehicles, emission regulations, and shifting global supply chains, constituents of the index were examined to make sure they remained relevant as well as representative of the core players in the sector.
Nifty Auto works on monitoring 15 auto-related firms that are eligible based on some eligibility conditions as specified by NSE Indices. Free-float market value, frequency of trading, and presence of the automobile industry are the factors considered. The index tries to reflect the Indian automobile industry's performance by aggregating different segments like passenger vehicles, two-wheelers, commercial vehicles, and auto components.
The index is computed on the basis of free-float market capitalization, i.e., only freely available shares are included. Its value fluctuates in real-time depending on the price fluctuations of the underlying stocks. The structure is reconstituted half-yearly to ensure consistency with the prevailing market forces so that the index remains relevant to sector movement.
Nifty Auto serves as a vital indicator for understanding the health of India’s automobile sector. It enables investors and analysts to monitor the collective performance of leading auto companies, offering insights into how economic, policy, or regulatory changes are impacting the industry. For example, vehicle sales, fuel prices, and emission rules often influence the index's movement.
Additionally, it is used as a foundation for developing sector-specific investment products such as index funds and ETFs. It helps market participants in sector rotation strategies, portfolio diversification, and benchmarking. Nifty Auto's transparent structure ensures fair tracking of auto stocks and allows investors to focus on specific segments of the equity market.
Investors can gain exposure to Nifty Auto through mutual funds and ETFs that replicate the index. These instruments are designed to hold the same 15 stocks in the same proportion as the index. This method offers diversification across the automobile sector with a single investment, allowing for simplified portfolio management and sectoral tracking.
Another approach is to invest directly in the constituent stocks. This allows investors to select companies based on individual fundamentals or market view. However, this method may require deeper analysis and active monitoring. Choosing between ETFs and direct stock investments depends on the investor’s objective, experience, and risk tolerance.
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