NSE updates Nifty50 Value index with equal-weight metrics and tilt scoring
The National Stock Exchange has overhauled the Nifty50 Value index methodology to incorporate equal-weight valuation metrics and tilt scoring, altering how fund managers capture the value premium in India's largest companies.
The National Stock Exchange implemented a revised methodology for the Nifty50 Value index in June 2026. The update replaces rigid free-float weighting with a tilt mechanism that multiplies market capitalization by a stock's value score.
The exchange also standardized its multi-factor scoring and increased compulsory inclusions based on the value score from five to ten. The previous model weighted return on capital employed at 40 percent, price-to-earnings at 30 percent, price-to-book at 20 percent, and dividend yield at 10 percent. The new framework assigns an equal 25 percent weight to earnings-to-price, sales-to-price, book-value-to-price, and dividend yield.
Chintan Haria, Principal of Investment Strategy at ICICI Prudential AMC, noted that the Nifty 50 universe offers scale and liquidity. He argued that applying a value screen to these established franchises allows investors to target cheaper stocks without sacrificing quality.
Haria explained that the four selected metrics cover distinct parts of a corporate financial profile, including earnings, revenue, balance sheets, and shareholder returns. He stated there is no robust basis to claim one valuation signal is reliably superior to another across all market cycles.
The revised framework does not include a direct quality safeguard like return on capital employed to prevent value traps. Haria warned that the strategy remains a pure valuation tilt, meaning it may still include statistically cheap companies with deteriorating fundamentals or poor capital allocation.
Because the scoring occurs across the entire Nifty 50 rather than within specific sectors, the index lacks explicit sector caps. Haria pointed out that structurally cheap sectors, such as financials, could become overweight due to the relevance of book value in analyzing those firms.
The revision shifts the reconstitution cycle to semi-annual reviews in June and December, which increases the potential for portfolio churn. A 15 percent single-stock cap applied during these reviews limits concentration risk. Haria suggested investors treat the strategy as a satellite allocation suited for those with a five-year or longer investment horizon, rather than a replacement for conventional large-cap funds.
