Nifty India Tourism Index: All you need to know

The Indian tourism sector has seen strong growth over the last few years and is a key contributor to the country's GDP. The tourism industry is expected to grow to $125 billion by FY27, making it an area of interest for investors. Those looking to track the performance of the tourism sector in the stock market can now do so with the newly launched Nifty India Tourism Index. In this blog, we shall explore the purpose of the Nifty India Tourism index, its sectoral composition and importance.

What is Nifty India Tourism Index?

Nifty India Tourism Index, a new thematic index launched by NSE indices, aims to track the performance of stocks from the tourism and travel sector. This index only considers those stocks which are part of the Nifty500 pack. It can be used for a variety of purposes such as benchmarking fund portfolios, launching index funds, and ETFs. Typically, indices like Nifty India Tourism are designed to serve as benchmarks for investors and analysts to gauge the performance of the tourism sector in India.

Composition & Methodology of Nifty India Tourism Index

Understanding the composition and methodology of the Nifty Tourism Index is important as investors can grasp how the index operates and the factors that influence its performance. Nifty India Tourism Index will include the largest 30 stocks from the eligible industries. 

Only those stocks forming part of the following industries shall be eligible to be included at the time of review.

• Airline
• Airport & Airport services
• Amusement Parks/Other Recreation
• Hotel & Resorts
• Restaurants
• Tour, Travel Related Services
• Companies belonging to manufacturing of trolley bags, suitcases, luggage

The weight of each stock in the index is based on free-float market capitalisation. No single stock can exceed 20% weightage. To keep it diverse, 3 sectors will form part of the index - Consumer Services (66.98% of the index), services sector (29.73% of the index), and consumer durables (3.29% of the index).

Nifty India Tourism Index has a base date of April 1, 2005, and a base value of 1000. The index will be reconstituted twice a year and rebalanced quarterly to reflect changes in travel and tourism sector.

Which stocks are part of Nifty India Tourism Index?

While Nifty India Tourism index can have 30 stocks, currently it has 17 stocks. 

Airline operator IndiGo (InterGlobe Aviation) has the highest weightage in the sector at 20.01%. It is followed by Tata Group's Indian Hotels which has 19.89% weightage. Ticketing platform IRCTC has 14.40% weightage, while GMR Airports has 9.72% weight. 

Some of the other companies that hold significant shares in the index are - Jubilant FoodWorks, EIH, Lemon Tree Hotels, Sapphire Foods India, Devyani International and Westlife Foodworld.

Here is a list of all companies that are part of tourism index

What has been Nifty India Tourism Index performance?

This index has over the past year delivered a gain of 41.98%. Over the five-year period, Nifty India Tourism index’s returns have seen a healthy 5-year CAGR of 19.49%. Since its inception on 1 April 2005, the index has offered a CAGR of 12.19%.

What are benefits for investors from Nifty India Tourism Index?

The Nifty India Tourism Index holds importance for several reasons:

Tracking Sectoral Performance: This index is tailored to track the performance of companies within the tourism industry. This provides investors insights into how the sector is performing versus the broader markets, and make investment decisions accordingly.

Focused Exposure: This index offers investors targeted exposure to the tourism sector, allowing them the opportunity to capitalise on opportunities in this niche area.

Diversification: Nifty Tourism Index offers exposure to stocks from diverse industries within this theme, such as airlines, hotels, restaurants etc. This diversification can help reduce the overall portfolio risk.

Conclusion

In summary, the Nifty India Tourism Index is important as it provides a specialised benchmark for assessing the performance of the tourism sector in the stock market. This index offers insights for investors to make informed decisions about this growing sector. However, investors need to remember that investment in a thematic sector carries risks, and they should do their own research or consult their financial advisors before making the decision.

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