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Digitisation has changed the way we live, affecting nearly every area of our life. The alarm we set on our mobile phones in the morning, smart appliances in the kitchen, the scanner we use in the office, online shopping, and several other things in the list signify the presence of the digital sector in our day-to-day lives. 

Considering this rapid adaptation and prospective growth of the digital theme, the National Stock Exchange of India (NSE) has launched Nifty India Digital Index. The index consists of stocks of companies in the digital sector. It tracks the performance of selective companies belonging to software, e-commerce, IT-enabled services, industrial electronics, and telecom services sectors. The core objective of the index is to give a concentrated exposure to one of the booming and important sectors of the economy. 

Why the digital theme?

Ø  Changing consumption patterns leading to rise in demand 

Digitisation has brought a lot of time and energy-conserving changes in our lives. As the young population across the globe starts adopting and enjoying new digital and technological advancements, the appeal for digital products and services is going to rise as well. 

Ø  Booming IT-BPM industry 

The IT & business service industry in India has its reach across the globe, and it is diversified across multiple verticals, such as retail, telecom and BFSI. Given the hike in offshore demand for Indian software services, our IT market is expected to increase in the coming years  

Ø  Government’s support and initiatives 

The Indian government is taking a number of steps to promote the growth of the digital industry in the country. Radical efforts to enhance digital infrastructure in the country can also play a significant role in the digital industry’s development. 

Nifty India Digital Index aims to track companies that are most likely to benefit from the development in the digital sector and prosper in future. It includes companies having the exposure to the digital theme and which have the potential to rise as digital advancements reach the new pinnacle. 

Index funds or Exchange Traded Funds following this index as their benchmark index will benefit from the growth of these digital-theme based companies. Investors investing in such schemes are likely to create wealth from the boom of the digital sector in the future. 

Structure of the NSE Digital Index 

The index comprises 30 stocks based on their six-month average. Stock weight is capped at 7.5% each, and it is decided based on their free-float market capitalisation (as on the cutoff dates at the end of January and July). The sector weights are capped at 50% each.

The new index was launched on December 14, 2021 and April 01, 2005, is considered as the base date for the index. The base value is Rs. 1,000. The index is reviewed and reconstituted on a semi-annual basis. 

Who should invest in NSE Digital Index 

Investors believing in the growth of the digital industry and those willing to earn reasonable returns from the growth of companies in the digital space should consider investing in the Nifty India Digital Index. Also, those with a high-risk appetite, long-term investment horizon, and seeking thematic/sectoral diversification in the portfolio can consider investing in this index.