Complete Guide to Nifty Commodity Index: Selection to Investment Process

Commodities are essential for living and there are no two ways about it. Whether it is oil, cement, chemicals, or any other commodities, all these sectors have significant effects on market movement. This article will thus revolve around the nifty commodities index which is one of the most tracked indices for companies dealing in commodities. 

The article will help you understand the constituents of the index, selection criteria, index value derivation, how you can invest in the index, and more. 

NIFTY COMMODITY Index – Overview & Constituents 

The nifty Commodity index reflects the performance of the top 30 companies listed on the NSE which deals in commodities such as oil, chemicals, cement, metals, mining, sugar, power, and other such commodities essential for living. This index helps in understanding the trend in the above sectors as a whole. It also helps in understanding the demand and supply quotient in the core market. It is one of the most dynamic and tracked indices in the market. 

The nifty commodities index stocks list includes – (As of 6 January 2025)

ACC Ltd.	NHPC Ltd.
APL Apollo Tubes Ltd.	NMDC Ltd.
Adani Energy Solutions Ltd.	NTPC Ltd.
Adani Green Energy Ltd.	Oil & Natural Gas Corporation Ltd.
Adani Power Ltd.	PI Industries Ltd.
Ambuja Cements Ltd.	Pidilite Industries Ltd.
Bharat Petroleum Corporation Ltd.	Reliance Industries Ltd.
Coal India Ltd.	SRF Ltd.
Grasim Industries Ltd.	Shree Cement Ltd.
Hindalco Industries Ltd.	Steel Authority of India Ltd.
Hindustan Petroleum Corporation Ltd.	Tata Power Co. Ltd.
Indian Oil Corporation Ltd.	Tata Steel Ltd.
JSW Energy Ltd.	UPL Ltd.
JSW Steel Ltd.	UltraTech Cement Ltd.
Jindal Steel & Power Ltd.	Vedanta Ltd.

The top sectors by weightage – 

1. Oil, Gas & Consumable Fuels: 28.27%
2. Metals & Mining: 24.35%
3. Power: 21.48%
4. Construction Materials: 16.98%
5. Chemicals: 7.35%

The top ten stocks by weightage – 

1. Reliance Industries Ltd.: 10.11%
2. NTPC Ltd.: 8.77%
3. UltraTech Cement Ltd.: 7.24%
4. Tata Steel Ltd.: 6.36%
5. Oil & Natural Gas Corporation Ltd.: 5.16%
6. Grasim Industries Ltd.: 5.04%
7. Hindalco Industries Ltd.: 4.87%
8. Coal India Ltd.: 4.84%
9. JSW Steel Ltd.: 4.81%
10. Vedanta Ltd.: 4.19%

Selection Criteria

The stock selection criteria for the equity index Nifty Commodity index include – 

• Stocks should be from the Nifty 500 universe, however, in case the number of eligible stocks of a particular sector within the Nifty 500 gets below 10 then stocks from the top 800 companies based on average daily turnover and daily full market capitalization of the past six months. 
• Companies have to be engaged in dealing in commodities. 
• Minimum trading frequency of the eligible stock has to be 90% in the past six months
• As of the cutoff date, the listing history of the company has to be at least one month
• The final selection of the companies will be done based on free-float market capitalization. 

Factors Affecting the NIFTY COMMODITY Index

The factors which affect the Nifty commodity index are wide as the index is made of different sector’s stocks – 

• Inflation: One of the most important factors affecting this index is inflation as when the price level rises, the raw material gets costlier, which affects the supply and brings it down. The purchasing power decreases, dragging the demand down and this takes a toll on commodities sales which affects the share prices of the constituent companies and thus affects the index value. 
• Geopolitical issues: Petroleum prices, metals prices, and many other commodities prices are dependent on export demand. When there are geopolitical issues, then the commodities prices thus get affected in turn making the index volatile. 
• Weather conditions: The stocks constituting the index include companies dealing in commodities that are heavily dependent on weather conditions such as sugar, and similar commodities that get affected by extreme weather conditions. Thus, affecting the index in the run. 
• Job creation: When the market is growing, the economy is growing, jobs get created which in turn pushes the income level upward. When the economy grows, demand increases which in turn increases the demand for different commodities and affects the index value. 

NIFTY COMMODITY Index Calculation Method

For the Nifty Commodity index, the stocks are selected based on free-float market capitalization. 

• The current market price of the 30 stocks of the index is multiplied by the number of free-float shares, which excludes shares held by promoters, government, trusts, etc. This results in the weighted market cap of the stocks.  
• Then weighted market capitalization of all 30 stocks is taken into account and summed up. 
• Then the result is divided by the base period market capitalization to derive the index value. 

Nifty Commodity Index Value = (Current Market Cap or Weighted Market Cap/ Base Market Cap) *1000

Here is one thing you need to keep in mind the weightage of the index constituent is capped at 10%. 

Performance and Returns

Here are the returns for different periods – 

Price Returns

Since Inception: 10.48%

YTD: 5.25%%

1 Year:  5.25%

5 Year: 18.80%

QTD: -17.17%

Total Returns

Since Inception: 12.49%

YTD: 6.11%

1 Year:  6.11%

5 Year: 20.51%

QTD: -17.05%

Enjoy investing in the top stocks of the Nifty 500 universe with the NIFTY Commodity index on Shoonya App!

Risk and Volatility

Since Nifty Commodity invests across different sectors, due to diversification, the risk and volatility factors are lower. 

The standard deviation of the index for 1 year stands at 21.47% while that for 5 years stands at 22.52% and since inception, it is as high as 24.74%. 

The beta compared to the Nifty 50 is a bit higher which represents the volatility. For 1 year the beta is 1.32 which means the volatility of the Nifty commodity index is a bit higher than nifty 50. 

How to Invest in the NIFTY COMMODITY INDEX?

You can invest in the Nifty Commodity Index using ETFs, or index funds, or you can trade them on the trading platform. You can also trade Nifty Commodity Index futures, and options in the F&O section of Shoonya’s app. To do so, you have to add the index to your watchlist following these steps – 

• Open the Shoonya app.
• Head to the “Watchlist” tab located at the bottom of your screen.
• In the search bar, type “NIFTY IN” or “SENSEX IN” and add it to the watch list, and then you will be able to see the indices.
• Once you find your desired index, click on the add option given on the right side.
• Now you can see the index on the watchlist. 

Conclusion

The Nifty Commodity Index is one of the most followed indices which helps in keeping the investors informed about the sectors dealing in commodities. The well-diversified portfolio of the index makes it perfect for long-term investment. 

FAQs| NIFTY COMMODITY Index

Source: ValueResearch

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.