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The Nifty Financial Services Index is a sectoral index that tracks the performance of companies operating in the financial services sector in India. Also known as Finnifty Index, it includes not just banks but also non-banking financial companies (NBFCs), insurance companies, and other financial/fintech services providers.
It made its debut on the NSE in 2011, and its primary purpose is to offer investors a means to evaluate the health, growth, and trends within the financial services sector, while also serving as a benchmarking reference for fund managers and analysts.
The value of the Nifty Financial Services Index is calculated using a market capitalization-weighted methodology. Each stock's weight in the index is proportional to its free-float market capitalization — excluding shares held by promoters and other strategic investors — ensuring that larger companies have a greater impact on the index value.
Stocks included in the Nifty Financial Services Index are selected based on specific eligibility criteria including market capitalisation, liquidity, trading frequency, and sector representation.
To be considered for inclusion, securities need to be listed on the NSE, operate within the Financial Services sector, and preferably be traded on the F&O segment. Newly listed companies may also be eligible if they meet the criteria for a three-month period.
The selection process involves calculating weights for each financial services sub-sector based on average float-adjusted market capitalization, and sorting companies within each sub-sector based on market capitalisation. No single stock should exceed 33%, and the top three stocks should not surpass 62% combined.
The index provides exposure to a wide range of companies including banks, insurance companies, and other financial institutions, mitigating risk through diversification.
The index focuses on the financial services sector, allowing investors to capitalize on the growth potential of this key industry. It serves as a benchmark for evaluating the performance of financial services investments, with high-liquidity constituents and long-term growth potential.