Last Updated on Nov 3, 2021 by Ayushi Mishra

As part of its periodic review, NSE Indices Ltd modified the eligibility criteria and substituted stocks for various Nifty indices.

The Nifty Pharma Index went through a major reorganization. It used to constitute 10 companies. But now, 10 more companies got added to the list making it a total of 20 pharmaceutical companies.

If you focus on the returns, Nifty pharma recorded a growth of 25% over the past year. What can investors expect with the addition of 10 companies?

Well, with the increase of the companies in the Nifty Pharma index, the free float coverage of pharmaceutical companies will increase from 70% to 90%.

With this change, the various ETFs like Nippon India Nifty Pharma ETF will undergo rebalancing. This is so that they can closely track the revised Nifty Pharma Index.

These changes will come into effect from 30 September 2021. The 10 companies that would be added to the index are not yet finalised. One of the primary qualifying criteria for the selection of constituent companies in the Nifty Pharma Index is that a pharma business should be a part of the Nifty 500 at the time of the semi-annual review.

Ayushi Mishra