INTRODUCTION OF INDIA INDEX SERVICES & PRODUCTS LIMITED

India Index Services & Products Limited (IISL)- is a joint venture between NSE and
CRISIL LTD. (formerly Credit Rating Information Services of India Limited) which was set up
in May 1998 to provide a variety of indices and indices related services and products for the
Indian capital markets. It has a consulting and licensing agreement with Standard & Poors
(S&P) the worlds leading provider of investible equity indices, for co-branding equity indices.
IISL provides a broad range of services, products and professional index services. It maintains
over 80 equity indices comprising broad-based benchmark indices, sectoral indices and
customized indices. Many investment and risk management products based on IISL indices have
been developed in the recent past, within India and abroad. These include index based
derivatives traded on NSE and Singapore Exchange and a number of index funds. NSE owns
50.99% equity in IISL.

MEANING OF IISL
India Index Services and Products Ltd (IISL), a joint venture between NSE and CRISIL Ltd.,
was set up in May 1998 to provide a variety of indices and index related services and products
for the Indian capital markets. It has a licensing and marketing agreement with Standard and
Poor's (S&P), the world's leading provider of investible equity indices, for co-branding equity
indices. It is based in Mumbai, Maharashtra. India Index Services & Products Ltd. operates as a
subsidiary of NSE Strategic Investment Corporation Limited. The company maintains over 80
equity indices comprising broad-based benchmark indices, sectoral indices and customized
indices.
Many investment and risk management products based on IISL indices have been developed in
the recent past, within India and abroad. These include index based derivatives traded
on NSE, Singapore Exchange(SGX) and Chicago Mercantile Exchange (CME) and a number of
index funds and exchange traded funds.

IISL has been formed with the objective of providing a variety of indices and index related
services and products for the capital markets.
India Index Services & Products Limited (IISL), a subsidiary of NSE Strategic Investment
Corporation Limited was setup in may 1998 to provide a variety of indices and index related
services and products for the Indian capital markets.
IISL provides a broad range of services, products and professional index services. It maintains
over 80 equity indices comprising broad-based benchmark indices, sectoral indices and
customised indices. Many investment and risk management products based on IISL indices
have been developed in the recent past, within India and abroad. These include index
based derivatives traded on NSE, Singapore Exchange (SGX) and Chicago Mercantile
Exchange (CME) and a number of index funds and exchange traded funds.

IISL LICENCING
IISL Indices are used as an underlying for a wide range of financial instruments offered by
financial institutions, asset management companies, etc., to their investors worldwide. These
include structured financial products as well as index funds and exchange traded funds. A license
from IISL is required for creating a product based on or linked to an IISL index. IISL also offers
annual global licenses covering all index-linked financial instruments by an institution, as well as
licenses for single transactions.
Benchmarking
Investors, asset managers and financial institutions may use IISL indices to track the
performance of funds, or as benchmarks for their actively managed portfolios, in particular. If an
institution is benchmarking the performance of its product to any of the IISL Indices, prior
approval is required from IISL along with payment of fees, where applicable. If the AMC or the
financial institution uses the IISL trademarks and the indices as an underlying for their Products,
then it is mandatory for these financial institutions to seek IISLs prior approval and executing a
license agreement with IISL.
IISL SUBSCRIPTION
IISL offers a range of Index products that provide ongoing and historical data and information on
individual securities in the India. These data products are designed for clients who require
consistent measures of capital market performances as well as the underlying data on component
securities.
Investors, asset managers and financial institutions use data related to IISL indices for their
benchmarking and indexing purposes. IISL Index Data Products are the original and official
source of data that formulates the proprietary calculation and maintenance of IISL indices.
IISL Index Data Products are tools to measure equity market movements at all levels of detail
and sophistication. Index constituent data includes company names, identifiers, market
capitalization, weights and prices.
3

OBJECTIVES OF IISL
IISL pools the index development efforts of NSE into a coordinated whole - India's first
specialised company focused upon the index as a core product . IISL has the following
objectives:

To develop, construct and maintain indices on Indian equities that serve as useful market
performance benchmarks and are the underlying indices for derivatives trading

To provide data and information on the trading activity in the Indian STOCK MARKETS

COMMITTEES & FINANCIAL INFORMATION OF IISL

Index Maintenance plays a crucial role in ensuring stability of the Index as well as in meeting its
objective of being a consistent benchmark of the equity markets.
IISL has constituted an Index Policy Committee, which is involved in policy and guidelines for
managing the CNX Indices. The Index Maintenance Sub-committee takes all decisions on
addition/ deletion of companies in any Index.

Index Policy Committee

Sr.No. Name & Designation

1.

2.

3.

4.

5.

Company

Mr. A. Balasubramaniam

Birla Sun Life Asset

Chief Executive Officer

Management Company Ltd.

Mr. A. K. Sridhar
Chief Investment Officer

IndiaFirst Life Insurance Company Ltd.

Dr. Ajay Shah

National Institute of Public Finance and

Senior Fellow

Policy

Ms. Ashu Suyash

Managing Director & Country Head

Mr. D. C. Anjaria
Director

L&T Investment Management Ltd.

International Financial Solutions Pvt. Ltd.

6.

7.

8.

9.

10.

11.

Mr. Milind Barve

Managing Director

Mr. R. Sundararaman
Senior Vice President

Mr. Rajat Jain

Chief Investment Officer

HDFC AMC Ltd.

National Stock Exchange of India Limited

Principal Asset Management Company Ltd.

Mr. Sanjiv Shah

Goldman Sachs Asset Management (India)

Joint Chief Executive Officer

Private Ltd.

Mr. Sashi Krishnan

Chief Investment Officer

Birla Sun Life Insurance

Dr. Susan Thomas

Indira Gandhi Institute of Development

Asst. Professor

Research

Mr. Vivek Kudva

12.

Managing Director for India,Central &

Eastern Europe,

Franklin Templeton Investments

Middle East and Africa

Index Maintenance Sub-Committee

Sr.No. Name & Designation

Company
6

1.

2.

3.

4.

Mr. Anjan Deb Ghosh

ICRA Ltd.

Senior Group Vice-President

Mr. Milind Gadkari

Credit Analysis & Research Ltd.

Chief General Manager

Mr. R. Sundararaman

National Stock Exchange of India Ltd.

Senior Vice President

Mr. Suprabhat Lala

National Stock Exchange of India Ltd.

Vice President

Debt Index Management Committee

Ads by SenseAd Options

Sr.No. Name & Designation

1.

Mr.

Rakesh

Company

Valecha India Ratings & Research

Senior Director, Head - Corporate

Rating

Ms.
2.

Rama

Vasantharajan

Senior Vice President & Head Compliance & Risk Management

3.

4.

Mr.

R.

Sundararaman

Senior Vice President

Ms.

Huzan

Consultant

Mistry

Birla Sun Life Asset Management Company

Ltd.

National Stock Exchange of India Ltd.

National Stock Exchange of India Ltd.

Products & Services

IISL offers a wide range of products and services which are key support tools for the equity
markets. We provide reliable, accurate and valuable data on indices and index related services to
cater to the needs of various segments of users. Our speciality is indices based on Indian equity
markets, which may be used for benchmarking, trading or research. Use of IISL data or name or
indices requires alicense or subscription.
Financial products on IISL Indices
IISL maintains, develops, compiles and disseminates entire gamut of equity indices. Licensing is
mandatory for tracking the performance of an IISL Index. Licensing is also required for use of
the name of IISL or CNX or any IISL Index. Fees for licensing would vary according to the type
of the product and the period.
IISL indices are useful for fund managers, corporates, brokers and all such enterprises connected
with investments in the equity markets. These indices can be used for tracking the markets,
8

understanding the performance of a company vis-a-vis the market, determining how an investors
portfolio is performing as compared to the market, trading derivative products and most
importantly for development of index based funds by mutual funds.
Data subscription
IISL provides index data on a periodic basis through its designated URL. Data includes Index
values, index constituents etc. This is a paid service and the subscription charges vary depending
upon the type of data sought and the period.
Customized Indices
IISL undertakes development & maintenance of customised indices for clients for tracking the
performance of the client portfolio vis--vis objectively defined benchmarks, or for
benchmarking NAV performance to customised indices. The customised indices can be sub-sets
of an existing index or a completely new index viz; sector indices, individual business group
indices, industry indices, etc. Customised indices serve as the basis for multiple types of
investment products; structured products, over-the-counter (OTC) options and notes, mutual
funds and ETFs.
Index Data Subscription
IISL offers a range of Index products that provide ongoing and historical data and information on
individual securities in the India. These data products are designed for clients who require
consistent measures of capital market performances as well as the underlying data on component
securities.
Investors, asset managers and financial institutions use data related to IISL indices for their
benchmarking and indexing purposes. IISL Index Data Products are the original and official
source of data that formulates the proprietary calculation and maintenance of IISL indices.
IISL Index Data Products are tools to measure equity market movements at all levels of detail
and sophistication. Index constituent data includes company names, identifiers, market
capitalization,weights and prices.
9

Data Uses and Applications

Asset Allocation
Index data are tools to determine which and how much of each market segment for each
investment strategy. Additionally, data could be used for research for allocation strategy
overtime.

Quantitative Research
Index back history allow investors to define and test investment strategies, stock selection
models, and fundamental ratio analysis such as price-to-earnings, yield, etc.

Portfolio Construction
Passive managers use index data for replication to create an exact index portfolio. Active
managers use index data to construct the list of equity securities for potential investment. With
the underlying data, they can overweight or underweight selected securities in their efforts to
outperform the index while managing tracking errors.

Risk Monitoring
Used as an analytics tool, index data measures aggregate statistics on portfolio positions.
Managers, in turn, monitor and control exposure to specific market and systemic risk factors
such as companies, credit quality, and sectors.

Performance Attribution Analysis

Looking at single exposure factors, managers can analyze the specific effects contributed or
detracted most from ex-post performance. With the underlying index data, they can compare
their portfolios against indices.
Index Licensing

10

IISL Indices are used as an underlying for a wide range of financial instruments offered
by financial institutions, asset management companies, etc., to their investors worldwide. These
include structured financial products as well as index funds and exchange traded funds.
A license from IISL is required for creating a product based on or linked to an IISL index. IISL
also offers annual global licenses covering all index-linked financial instruments by an
institution, as well as licenses for single transactions.
Benchmarking
Investors, asset managers and financial institutions may use IISL indices to track the
performance of funds, or as benchmarks for their actively managed portfolios, in particular. If an
institution is benchmarking the performance of its product to any of the IISL Indices, prior
approval is required from IISL along with payment of fees, where applicable. If the AMC or the
financial institution uses the IISL trademarks and the indices as an underlying for their Products,
then it is mandatory for these financial institutions to seek IISLs prior approval and executing a
license agreement with IISL.
Licensed Uses and Applications

Structured Products & Derivatives

The market for structured products and derivatives ranges from un-leveraged indexed notes to
payouts for sophisticated, risk tolerant holders. IISL index-linked derivatives allow investors to
create, control or maximize market exposure. Options, warrants, notes, bonds and trusts linked to
IISL indices can be issued by prospective clients.

Index Funds
Indexing continues to gain popularity among individual and institutional investors. Most major
mutual fund families have responded to client demands and added funds indexed to the IISL
Indices. Index Funds today are a source of investment for investors looking at a long term, less
risky form of investment. The success of index funds depends on their low volatility and
therefore the choice of the index.
11

Exchange Traded Funds

The expansion of the exchange-traded funds market to the Indian exchange is a testament to the
growing popularity of this product. The ETFs offers the ability to establish long-term
investments based on the market performance of the top companies in India, with the ease of
a singletransaction and will provide the tools needed to capture the investment opportunities
created by economic shift. For the mechanism to work, potential arbitragers need to have full,
timely knowledge of a fund's holdings. The success of ETFs on indices depends on their low
volatility and tracking error therefore the choice of the index.
Annuities and Other Insurance Products

Variable life, variable and fixed annuities and universal life products are structured to provide a
return based on an IISL index's growth. Like a traditional annuity, purchasers receive a
guaranteed return of principal along with a minimum interest rate. However, annuities linked to
the IISL indices provide greater return potential by enabling purchasers to benefit from growth in
the Indian STOCK MARKET.
Guaranteed Funds and Structured Products

While passive index investing continues to grow, guaranteed products have long been a hallmark
of these markets. In response to client demand, major asset management companies and banks
issue index products such as tracker funds, warrants and individual certificates linked to IISL
indices
India Index Services & Products Ltd. indices and index related services and products for the
capital markets. The company maintains over 80 equity indices comprising broad-based
benchmark indices, sectoral indices and customized indices. The company was founded in 1998
and is based in Mumbai, Maharashtra. India Index Services & Products Ltd. operates as a
subsidiary of NSE Strategic Investment Corporation Limited.

IISL PLANS TECH INDEX

INDIA Index Services & Products Ltd (IISL), the joint venture formed by Crisil and National
Stock Exchange, is likely to introduce a technology index in the near future.

12

Mr. Arup Mukherjee, CEO of IISL, said the company would consider stocks from technologydriven sectors such as telecommunications, media and other IT-enabled services. IISL sees
considerable scope for these sectors in the days to come.
When constituted, the proposed index would be the 90th from the IISL stable, and would
have an identity distinct from that of the information technology index currently maintained
by the company.
Technology-intensive sectors account for a big part of the market capitalisation of the S&P
CNX 500. Their market cap increased from 14.1 per cent to 29.5 per cent between October
1996 and October 1999 in this 500-share index. During this period, the bro ad market grew
at around 15.7 per cent per annum.
Against these figures, the technology-intensive sectors grew by 39.1 per cent over the same
period. If these were excluded, the market would have recorded only a 10.2 per cent
growth.
IISL, which believes indices should not be susceptible to manipulation, hopes to come to the
aid of developments that are set to take place in the Indian capital market. These include
introduction of derivatives trading _ a system that would provide mark et participants a
facility to manage their exposures in a cost-effective manner.
The Crisil-NSE joint venture would have a range of products (indices) and offer professional
services to sustain investment opportunities in the emerging scenario, Mr. Mukherjee said.
According to Mr. Ashishkumar Chauhan, Vice-President, NSE, the Nifty (NSE's most popular
index) accurately catches the behaviour of the equity markets. The last change in the Nifty
took place about six months ago.
In the context of changes in its indices, NSE feels that ``index maintenance'' plays a
significant role in terms of adding stability and consistency. IISL has an Index Policy
Committee, which forms norms to manage the CNX range of indices. An Index Maint enance
Sub-committee decides on alterations _ that is, adding and deleting _ to these indices.
Each index has a `replacement pool', made up of companies that meet all conditions that
could make them part of that benchmark, Mr. Chauhan stated.
It is observed that the weightage of a particular stock in an index is a critical factor. Infosys
Technologies, incidentally, has a 14 per cent weightage in Nifty. An eight per cent movement
in Infosys would roughly translate into a 1-2 per cent movement in the Nifty.
NSE campaign on derivatives NSE, which proposes to launch index futures trading soon, is
conducting various training programmes and seminars to increase awareness.

13

According to Mr. Chauhan, the exchange has already held 50 programmes in its effort to
reach out to small investors across the country. One such programme was held in Calcutta
on Saturday. Two more are being planned in other centres in the East.
NSE, as part of this campaign, has introduced Web-based certification programme on
derivatives as per the L C Gupta Committee's recommendation. `NSE's Certification in
Financial Market', as the programme is called, has been attracting sections of the pub lic,
including NSE's trading members.

14

IISL PRODUCI AND SERVICE

IISL offers a wide range of products and services which are key support tools for the equity
markets. We provide reliable, accurate and valuable data on indices and index related services to
cater to the needs of various segments of users. Our speciality is indices based on Indian equity
markets, which may be used for benchmarking, trading or research. Use of IISL data or name or
indices requires a license or subscription.
Financial products on IISL Indices
IISL maintains, develops, compiles and disseminates entire gamut of equity indices. Licensing is
mandatory for tracking the performance of an IISL Index. Licensing is also required for use of
the name of IISL or CNX or any IISL Index. Fees for licensing would vary according to the type
of the product and the period.
IISL indices are useful for fund managers, corporates, brokers and all such enterprises connected
with investments in the equity markets. These indices can be used for tracking the markets,
understanding the performance of a company vis-a-vis the market, determining how an investors
portfolio is performing as compared to the market, trading derivative products and most
importantly for development of index based funds by mutual funds.
Data subscription
IISL provides index data on a periodic basis through its designated URL. Data includes Index
values, index constituents etc. This is a paid service and the subscription charges vary depending
upon the type of data sought and the period.
Customized Indices
IISL undertakes development & maintenance of customised indices for clients for tracking the
performance of the client portfolio vis--vis objectively defined benchmarks, or for
benchmarking NAV performance to customised indices. The customised indices can be sub-sets
15

of an existing index or a completely new index viz; sector indices, individual business group
indices, industry indices, etc.

NV20 Index
Introduction:
The NV20 Index is designed to reflect the behaviour and performance of a diversified portfolio
of value companies forming a part of CNX Nifty Index. It consists of the most liquid value blue
chip companies. The NV20 Index comprises of 20 companies listed on the National Stock
Exchange (NSE). Value companies are normally perceived as companies with low PE (Price to
Earning), low PB (Price to Book) and high DY (Dividend Yield).
Index Construction & Review Methodology:
The index is calculated using free float market capitalization methodology and has a base date of
January 1, 2009 indexed to a base value of 1000. At the time of rebalancing of shares/ change in
index constituents/ change in investable weight factors (IWFs), the weightage of the index
constituent (where applicable) is capped at 13%. Weightage of such stock may increase up to a
maximum of 15% between the rebalancing periods.
Selection Criteria
The criteria for the NV20 Index include the following:
Companies forming the part CNX Nifty on the construction and rebalancing date are taken
into consideration for selection of stocks
Stocks are selected on the basis of ROCE (Return on Capital Employed), PE, PB and DY and
final ranking is derived to select the value stocks from CNX Nifty.
Ranks are assigned to all the Nifty constituents based on each parameter i.e. ROCE, PE, PB &
DY *.Relatively lower PE and PB receives a better rank, while higher DY and ROCE receive a
better rank.
16

 Weights of 0.4, 0.3, 0.2 and 0.1 are assigned to ranks of ROCE, PE, PB and Dividend Yield
respectively to derive the final ranking for selection.
The top 20 companies as per the ascending order of the final ranking are selected to form the
index.
Index Review
The review will take place on a semi-annual basis.
In order to reduce the number of rebalancing of constituents in a review, a buffer of 50% of
total number of the constituents shall be applied at the time of each review. This means that if the
existing constituent at the time of the review ranks within the top 30, the same can be retained in
the index. However if a stock ranks within the top 5 stocks in the rebalancing pool the stock with
the lowest rank from the existing constituents would be replaced with the same.
Effective 3rd March 2014 shares on which dividends of not less than four percent, including
bonus have been paid for at least seven years out of the nine years immediately preceding the
review period will be considered as one of the criteria for selection of the stock.

17

Index Construction:
Calculation Methodology
The index is calculated using free float market capitalization methodology. At the time of
rebalancing of shares/ change in index constituents/ change in investable weight factors (IWFs),
the weightage of the index constituent (wherever applicable) is capped at 13%. Weightage of
such stock may increase up to a maximum of 15% between the rebalancing periods.
Index Maintenance:
Rebalancing
Index maintenance plays a crucial role in ensuring the stability of the index, as well as in meeting
its objective of being a consistent benchmark of the Indian equity markets.
IISL has constituted an Index Policy Committee, which is involved in the policy and guidelines
for managing the IISL indices. The Index Maintenance Sub-Committee makes all decisions on
additions and deletions of companies in the index within the policies and guidelines prescribed
by the Index Policy Committee.
Changes in the index level reflect changes in the market capitalization of the index which are
caused by stock price movements in the market. They do not reflect changes in the market
capitalization of the index, or of the individual stocks, that are caused by corporate actions such
as dividend payments, stock splits, mergers, or acquisitions etc.
When a stock is replaced by another stock in the index, the index divisor is adjusted so the
change in index market value that results from the addition and deletion does not change the
index level.

18

Calculation Frequency
The index is calculated end of day basis on all days that the National Stock Exchange of India is
open for trading in equity shares.
Corporate Actions and Share Updates
Maintaining the index include monitoring and completing the adjustments for company additions
and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to
restructurings or spin-offs. Some corporate actions, such as stock splits and stock dividends,
require simple changes in the common shares outstanding and the stock prices of the companies
in the index. Other corporate actions, such as share issuances, change the market value of an
index and require a divisor adjustment to prevent the value of the index from changing.
Adjusting the divisor for a change in market value leaves the value of the index unaffected by the
corporate action. This helps keep the value of the index accurate as a barometer of stock market
performance, and ensures that the movement of the index does not reflect the 5

19

corporate actions of the companies in it. Divisor adjustments are made after the close of trading
and after the calculation of the closing value of the index.
Corporate actions such as splits, stock dividends, spin-offs, rights offerings, and share changes
are applied on the ex-date.
All singular instances of share changes arising out of additional issue of capital, such as ESOPs,
QIPs, ADR/GDR issues, private placements, warrant conversions, and FCCB conversions, which
have an impact of 5% or more on the issued share capital of the security, are implemented after
providing a five days notice period. Share repurchase (buyback) also have the same rules as
applicable to share changes.
Changes entailing less than 5% impact on the issued share capital are accumulated and
implemented on a monthly basis.
Where cumulative share changes exceed 5% of the issued share capital within a month, such
changes are implemented after providing five days notice period, from the date when such
cumulative changes exceeded 5%.
At the time of every rebalancing that is resulted on account of change in the index constituents,
change in equity, changes in IWFs and payment of special dividend (dividend amount more than
5% of the market price), weights of each scrip are realigned to 13% by making a suitable divisor
adjustment.
Currency of Calculation
For calculation of the index, all prices in Indian rupees are considered
Total Return
The index reflects the return one would get if an investment is made in the index portfolio. As
this index is computed on an end of day basis, it takes into account only the stock price
movements. However, the price indices do not consider the return from dividend payments of
20

index constituent stocks. Only the capital gains and losses due to price movement are measured
by the price index. In order to get a true picture of returns, the dividends received from the index
constituent stocks also need to be included in the index movement. Such an index, which
includes the dividends received, is called the total return index.
The total return index reflects the returns on the index from stock prices fluctuation plus
dividend payments by constituent index stocks. IISL also calculates the total return index values
on end of day basis for all these indices. 6

21

Index Governance:
Index Committee
A professional team at IISL manages the index. There is a three-tier governance structure
comprising the Board of Directors of IISL, the Index Policy Committee, and the Index
Maintenance Sub-Committee. IISL has constituted the Index Policy Committee, which is
involved in the policy and guidelines for managing IISL indices. The Index Maintenance Subcommittee makes all decisions on additions and deletions of companies in the Index.
Index Policy
The indices use transparent, researched and publicly documented rules for its maintenance.
These rules are applied regularly to manage changes to the indices. Index reviews are carried out
periodically to ensure that each security in the index fulfills eligibility criteria.
Announcements
All index-related announcements are posted on the NSE Web site. Changes impacting the
constituent list are also posted on the Web site. Please refer to the NSE website at
www.nseindia.com.
Holiday Schedule
For the calculation of index, the IISL follows the official holiday schedule.
A complete holiday schedule for the year is available on the NSE website. Please refer to the
NSE website at www.nseindia.com
Index Precision
The level of precision for index calculation is as follows:
Shares outstanding are expressed in units
22

 Investible weight factors (IWFs) are expressed in six decimals

Capping factors are expressed in six decimals
Share prices are rounded to two decimal places
Float-adjusted market capitalization is stated to two decimal places
Index values are disseminated up to two decimal places

23

Appendix:
* Selection Parameters Calculation :
PE is calculated by dividing the market capitalization by trailing profits of the last four
quarters adjusted for free float of a company.
PB is calculated by dividing the market capitalization by Net-worth adjusted for free float of a
company.
DY is calculated by dividing annual dividends by market capitalization adjusted for free float
of a company.
Average of 12 months of PE, PB and DY is taken.
ROCE = EBIT/ Average Capital Employed

Where, EBIT is Earning Before Interest & Tax

Capital Employed is sum of all shareholders funds and total borrowings
Price Index Calculations Formula:
The index is calculated using free float market capitalization methodology. At the time of
rebalancing of shares/ change in index constituents/ change in investable weight factors (IWFs),
the weightage of the index constituent (where applicable) is capped at 13%. Weightage of such
stock may increase up to a maximum of 15% between the rebalancing periods.
Index Market Capitalization = Total shares * Price * IWF * Capping Factor
Index Value = Current Index market capitalization / Base Market Capital * Base Index Value
(1000)

24

Base market capital of the Index is the aggregate market capitalisation of each scrip in the index
during the base period. The market capitalization during the base period is equated to an Index
value of 1000 known as the base Index value.
Total Return (TR) Index Calculation Formula
The total return version of the index is also available, which assumes dividends are reinvested in
the index after the close on the ex-date. Corporate actions like dividend announcement do not
require any adjustment in the normal price index (other than special dividend). Special dividend
refers to a dividend thats more than 10% of close price of a stock declaring dividend. A suitable
divisor adjustment is made in case of a special dividend.
A separate Total Returns Index (TR) is calculated which shows the returns on Index portfolio,
inclusive of dividends.
Calculation of the TR Index:
TR Index = [Prev. TR Index + (Prev. TR Index * Index returns)] + [Indexed dividends +
(Indexed dividends * Index returns)]
Index dividend for the day t=
Total Dividends of the scrips in the Index/ Index divisor for the day
Total dividends of scrips in the Index = (Dividend per share * Modified index shares)
Modified index shares = Total shares * IWF * Capping Factor

25

IISL DISCLAIMER:
The Product(s) are not sponsored, endorsed, sold or promoted by India Index Services &
Products Limited ("IISL"). IISL does not make any representation or warranty, express or
implied, to the owners of the Product(s) or any member of the public regarding the advisability
of investing in securities generally or in the Product(s) particularly or the ability of the CNX
Nifty Junior Index to track general stock market performance in India. The relationship of IISL
to the Issuers only in respect of the licensing of certain trademarks and trade names of its Index
which is determined, composed and calculated by IISL without regard to the Issuer or the
Product(s). IISL does not have any obligation to take the needs of the Issuer or the owners of the
Product(s) into consideration in determining, composing or calculating the CNX Nifty Junior
Index. IISL is not responsible for or has participated in the determination of the timing of, prices
at, or quantities of the Product(s) to be issued or in the determination or calculation of the
equation by which the Product(s) is to be converted into cash. IISL has no obligation or liability
in connection with the administration, marketing or trading of the Product(s). IISL do not
guarantee the accuracy and/or the completeness of the CNX Nifty Junior Index or any data
included therein and they shall have no liability for any errors, omissions, or interruptions
therein. IISL does not make any warranty, express or implied, as to results to be obtained by the
Issuer, owners of the product(s), or any other person or entity from the use of the CNX Nifty
Junior Index or any data included therein. IIS L makes no express or implied warranties, and
expressly disclaims all warranties of merchantability or fitness for a particular purpose or use
with respect to the index or any data included therein. Without limiting any of the foregoing,
IISL expressly disclaim any and all liability for any damages or losses arising out of or related to
the Products, including any and all direct, special, punitive, indirect, or consequential damages
(including lost profits), even if notified of the possibility of such damages. An investor, by
subscribing or purchasing an interest in the Product, will be regarded as having acknowledged,
understood and accepted the disclaimer referred to in clauses above and will be bound by it.

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CNX NIFTY OF IISL

The CNX Nifty, also called the Nifty 50 or simply the Nifty, is National Stock Exchange of
India's benchmark stock market index for Indian equity market. Nifty is owned and managed by
India Index Services and Products (ISL), which is a wholly owned subsidiary of the NSE
Strategic Investment Corporation Limited. IISL had a marketing and licensing agreement with
Standard & Poor's for co-branding equity indices until 2013. The 'CNX' in the name stands for
'CRISIL NSE Index'.
CNX Nifty has shaped up as a largest single financial product in India, with an ecosystem
comprising: exchange traded funds (onshore and offshore), exchange-traded futures and options
(at NSE in India and at SGX and CME abroad), other index funds and OTC derivatives (mostly
offshore).
The CNX Nifty covers 22 sectors of the Indian economy and offers investment managers
exposure to the Indian market in one portfolio. During 2008-12, CNX Nifty 50 Index share of
NSE market capitalisation fell from 65% to 29%[1] due to the rise of sectoral indices like CNX
Bank, CNX IT, CNX Mid Cap, etc. The CNX Nifty 50 Index gives 29.70% weightage to
financial services, 0.73% weightage to industrial manufacturing and nil weightage to agricultural
sector.[2]
The CNX Nifty index is a free float market capitalisation weighted index. The index was initially
calculated on full market capitalisation methodology. From June 26, 2009, the computation was
changed to free float methodology. The base period for the CNX Nifty index is November 3,
1995, which marked the completion of one year of operations of National Stock Exchange
Equity Market Segment. The base value of the index has been set at 1000, and a base capital of
Rs 2.06 trillion.[3] The CNX Nifty Index was developed by Ajay Shah and Susan Thomas.

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IISL NAMED INDEX PROVIDER FOR CPSE ETF

The disinvestment department, in consultation with Goldman Sachs AMC, has appointed India
Index Services & Products (IISL), a subsidiary of National Stock Exchange (NSE), as the index
provider for the proposed CPSE exchange-traded fund (ETF).
The disinvestment department, in consultation with Goldman Sachs AMC, has appointed India
Index Services & Products (IISL), a subsidiary of National Stock Exchange (NSE), as the index
provider for the proposed CPSE exchange-traded fund (ETF).
ETFs, just like stocks, are listed and traded on the stock exchanges. Indias ETF industry is
small, with gold-based ones being the most common. Earlier this year, the Cabinet gave its
approval to form a first-of-its-kind ETF fund for PSUs. Sources said the government plans to
raise at least R5,000 crore through ETFs as a part of its R40,000-crore divestment plan in the
current fiscal.
After consulting market participants, IISL will finalise the basket of CPSE stocks out of 7-8
different models being considered by the entity. The ETF index will have 10-15 scrips of large
market-cap companies.
The PSU stock ETF is expected to be listed by October-November. The finance ministry is also
working on giving incentives, such as royalty bonus and upfront discount, to bring in retail
investors. Sources said some incentives might be considered for FIIs also before the fund gets
listed.
According to the plan, an index based on the shares of PSUs will be created. The index will get a
final approval by an empowered group of ministers, headed by finance minister P Chidambaram.
Once the index is finalised, the AMC will submit the offer documents to Sebi, which will
approve the listing of the new fund offer (NFO).
The methodology for selecting the PSU stocks depending on the total market capitalisation,
public float and weightage will be finalised after consultation with key investors.

28

A senior official said: The department, along with Goldman Sachs, will finalise composition of
the index based on the criteria, such as market capitalisation over R3,000 crore, good free float
and price performance of stock of last 3-5 years.
ETFs are expected to deepen the equity market and will be beneficial to government from a
pricing perspective. The fund will ensure that the stocks of such firms are not manipulated or
beaten down during the run-up to the divestment in PSUs. In the past, there have been instances
of PSU stocks falling before the public float, making it difficult for the government to raise the
targeted amount.
At present, there are 33 ETFs having assets under management of close to R11,500 crore and
held by 6.2 lakh investors. The concept of CPSE ETF is inspired from Hong Kongs Tracker
Fund.

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NSE INTRODUCTION
The National Stock Exchange of India Ltd. (NSE) is a stock exchange located in the financial
capital of India, Mumbai. National Stock Exchange (NSE) was established in the mid 1990s as a
demutualised electronic exchange. NSE provides a modern, fully automated screen-based trading
system, with over two lakh trading terminals, through which investors in every nook and corner
of India can trade.
NSE has a market capitalisation of more than US$1.5 trillion and Number of securities (equities
segment) available for trading are 3,091 as on June 2014.[2]Though a number of other exchanges
exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in
India, and between them are responsible for the vast majority of share transactions. NSE's
flagship index, the S&P CNX Nifty, is used extensively by investors in India and around the
world to take exposure to the Indian equities market.
NSE was started by a clutch of leading Indian financial institutions at the behest of the
Government of India to bring transparency to the Indian market, and has a diversified
shareholding comprising domestic and global investors. The domestic investors includes Life
Insurance Corporation of India, GIC, State Bank of India and Infrastructure Development
Finance Company (IDFC) Ltd, while the foreign investors include MS Strategic (Mauritius)
Limited, Citigroup Strategic Holdings Mauritius Limited, Tiger Global Five Holdings and
Norwest Venture Partners X FII-Mauritius. It offers trading, clearing and settlement services in
equity, debt and equity derivatives. It is India's largest exchange, globally in cash market trades,
in currency trading and index options. As on June 2013, NSE has 1673 VSAT terminals and 2720
leaselines, spread over more than 2000 cities across India.
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when Mr. P. V.
Narasimha Rao was the Prime Minister of India and Dr. Manmohan Singh was the Finance
Minister. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June
1994. The Capital market (Equities) segment of the NSE commenced operations in November
1994, while operations in the Derivatives segment commenced in June 2000.

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NSE GROUPS

National Securities Clearing Corporation Limited (NSCCL)

The National Securities Clearing Corporation Ltd. (NSCCL) a wholly owned subsidiary of NSE,
was incorporated in August 1995. It was the first clearing corporation to introduce settlement
guarantee. It commenced clearing operations in April 1, 1996.
NSCCL has been assigned the highest corporate rating of 'AAA' for three consecutive years. This
is the first Indian Clearing Corporation to get this rating.
More about NSCCL
NSE Infotech Services Limited (NSETECH)

NSE Infotech Services Limited (NSETECH) is a wholly owned subsidiary incorporated to cater
to the needs of NSE and all its group companies exclusively.

More about NSETECH

India Index Services & Products Ltd. (IISL)

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IIndia Index Services & Products Limited (IISL), a subsidiary of NSE Strategic Investment
Corporation Limited was setup in May 1998 to provide a variety of indices and index related
services and products for the Indian capital markets.

More about IISL

DotEx International. Ltd. (DotEx)

The data and info-vending products of NSE are provided through a separate company DotEx
International Ltd., a 100% subsidiary of NSE., which is a professional set-up dedicated solely for
this purpose. DotEX also offers "NOW" a fully managed, secure and reliable trading gateway,
providing immediate, scalable and seamless access through internet to members and internet
investors.

More about Dotex International Ltd..

NSE.IT Ltd.

NSE.IT is a 100% subsidiary of National Stock Exchange of India Limited (NSE). NSE.IT
Limited, a Vertical Specialist Enterprise, offers end-to-end Information Technology (IT)
products, solutions and services and has expertise in a wide range of business applications. It
specializes in providing complete IT solutions to Stock Exchanges, Clearing Corporations,
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Brokerage Firms, Insurance Firms and other organizations in the Capital Market, Banking and
Insurance industry. NSE.IT has emerged as the preferred technology partner for deploying high
end solutions for the financial services sector.

More about NSE.IT

ASSOCIATE / AFFILIATE COMPANIES
National Securities Depository Ltd. (NSDL)

The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL,
the first depository in India. NSE joined hands with the Industrial Development Bank of India
(IDBI) and the Unit Trust of India (UTI) to promote dematerialisation of securities. Together
they set up National Securities Depository Limited (NSDL), the first depository in India.

www.nsdl.co.in
National Commodity & Derivatives Exchange Ltd. (NCDEX)

NCDEX is a public limited company incorporated on April 23, 2003 under the Companies Act,
1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It commenced
its operations on December 15, 2003. NCDEX is a nation-level, technology driven de-mutualised
on-line commodity exchange with an independent Board of Directors and professional
management. It is committed to provide a world-class commodity exchange platform for market
participants to trade in a wide spectrum of commodity derivatives driven by best global
practices, professionalism and transparency.
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www.ncdex.com
Power Exchange India Limited (PXIL)

Power Exchange India Limited (PXIL) is Indias first institutionally promoted Power Exchange
that provides innovative and credible solutions to transform the Indian Power Markets.
PXILs unique combination of local insights and global perspectives helps its stakeholders to
make better informed business and investment decisions, improves the efficiency of the power
markets, and helps shape policies and projects. www.powerexindia.com

www.powerexindia.com

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CONCLUSION
Many investment and risk management products based on IISL indices have been developed in
the recent past, within India and abroad. These include index based derivatives traded
on NSE, Singapore Exchange(SGX) and Chicago Mercantile Exchange (CME) and a number of
index funds and exchange traded funds.
IISL provides a broad range of services, products and professional index services. It maintains
over 80 equity indices comprising broad-based benchmark indices, sectoral indices and
customised indices.
IISL is promoted by NSE, the countrys leading stock exchangeCNX Nifty, the most popular and
widely used indicator of the stock market in India, is owned125and managed by IISL, which also
maintains over 80 indices comprising broad based benchmarkindices, sectoral indices, thematic
indices, strategy indices and customised indices.
IISL has constituted an Index Policy Committee, which is involved in policy and guidelines for
managing the CNX Indices. The Index Maintenance Sub-committee takes all decisions on
addition/ deletion of companies in any Index.
CNX 100 is owned and managed by India Index Services & Products Ltd. (IISL). IISL is Indias
first specialized company focused upon the index as a core products.The CNX 100 Index
represents about 78.57% of the free float market capitalization of the stocks listed on NSE as on
June 30, 2014.

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