NSE Launches Nifty India Tourism Index: Key Travel Stocks to Watch

Introduction

The Indian tourism sector has emerged as a dynamic force in recent years, significantly contributing to the country's GDP and showcasing robust growth potential. Forecasts suggest that the tourism industry will expand to $125 billion by FY27, underscoring its critical role in the nation's economic landscape and making it an attractive prospect for investors. In response to this burgeoning sector, the National Stock Exchange (NSE) of India has introduced the Nifty India Tourism Index in June 2024. This new index offers a unique opportunity for investors to track and invest in the performance of the travel and tourism sector within the Indian stock market.

In this article, we delve into the objectives and composition of the Nifty India Tourism Index, highlighting its significance in capturing the essence of the tourism industry. By understanding this thematic index, investors can gain valuable insights into the sector's dynamics and its potential for driving economic growth and creating employment opportunities. Join us as we explore the key aspects of the Nifty India Tourism Index and its role in shaping the future of India's tourism industry.

What is the Nifty India Tourism Index?

The Nifty India Tourism Index, introduced by NSE, monitors the performance of tourism and travel sector stocks within the Nifty 500. This index serves as a key benchmark for fund portfolios and is ideal for launching index funds and ETFs, providing investors with a targeted measure of the tourism sector's market dynamics in India.

Performance of Nifty India Tourism Index

The performance of the Nifty India Tourism Index has been notable:

• Over the past year, the index has delivered a gain of 41.98%.

• Over five years, the index achieved a strong 5-year CAGR of 19.49%.

• The index has achieved a CAGR of 12.19% since its inception on April 1, 2005.

These figures highlight the index's strong performance across different time frames, reflecting its growth and potential in the tourism sector.

Composition and Methodology of the Nifty India Tourism Index

The Nifty India Tourism Index is crucial for investors seeking insights into its operational dynamics and performance influencers. Comprising the top 30 stocks from specific industries, it offers a window into its structured methodology.

Composition Criteria:

Only stocks from the following sectors are eligible:

Key Dates and Reconstitution:

Established on April 1, 2005, with a base value of 1000, the index undergoes bi-annual reconstitution and quarterly rebalancing to reflect sectoral shifts and market changes in travel and tourism.

Methodology:

The index weights stocks based on their free-float market capitalization, with no single stock exceeding 20% weightage. It encompasses three main sectors:

Stocks that are part of the Nifty India Tourism Index

The Nifty India Tourism Index currently consists of 17 stocks, selected from a total of 30 possible stocks.

IndiGo (InterGlobe Aviation), a major airline operator, holds the highest sector weightage at 20.01%. Following closely is Indian Hotels from the Tata Group, with a weightage of 19.89%. IRCTC, a prominent ticketing platform, holds a weightage of 14.40%, while GMR Airports has a weightage of 9.72%.

Additional notable companies featured in the index are Jubilant FoodWorks, EIH, Lemon Tree Hotels, Devyani International, Sapphire Foods India, and Westlife Foodworld.

Below is the table listing all companies included in the tourism index:

This table lists the companies along with their respective industries that are part of the Nifty India Tourism Index.

Benefits for Investors from the Nifty India Tourism Index

Investors can gain advantages from the Nifty India Tourism Index in several ways:

• Tracking Sectoral Performance: The index tracks the performance of companies within the tourism industry, providing insights into sector-specific trends compared to broader market indices.

• Focused Exposure: Investors gain targeted exposure to the tourism sector, allowing them to capitalize on opportunities specific to this niche area of the economy.

• Diversification: The index includes stocks from diverse industries within the tourism theme, such as airlines, hotels, and restaurants. This diversification helps reduce portfolio risk by spreading investments across various segments within the tourism sector.

Conclusion

The Nifty India Tourism Index, launched by NSE, offers investors a specialized benchmark for investing in India's growing tourism sector within the Nifty 500. With significant recent gains and robust long-term growth rates, it provides focused exposure to key tourism stocks while promoting portfolio diversification. As India's tourism industry expands, the index presents timely opportunities, but prudent research and advisory guidance are essential for aligning investments with individual financial goals and risk tolerance.

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Frequently Asked Questions

1. When was the Nifty India Tourism Index launched?

The Nifty India Tourism Index was launched by the National Stock Exchange (NSE) in June 2024 with 17 stocks, aiming to capture the performance of the tourism and travel sector.

2. How many stocks can be part of the Nifty India Tourism Index?

The Nifty India Tourism Index can include up to 30 of the largest tourism and travel stocks that are part of the NIFTY 500 index.

3. What is the highest weightage of stocks in the Nifty India Tourism Index?

Stocks in the Nifty India Tourism Index are capped at a maximum weightage of 20%. Weightage is determined based on free-float market capitalization to ensure balanced representation within the index.

4. What are the eligibility criteria for stocks in the Nifty India Tourism Index?

Eligible stocks must belong to sectors such as airlines, airports, hotels, restaurants, and other tourism-related services. They are selected based on specific industry criteria and market capitalization considerations.

5. What benefits do investors derive from the Nifty India Tourism Index?

Investors can track sector-specific performance trends, gain focused exposure to the tourism industry, and diversify their portfolios across various tourism-related sectors. The index also serves as a basis for launching index funds and ETFs tailored to the tourism sector.