All about Nifty IT

The Nifty IT Index is one of the key sectoral indices in the Indian stock market owing to the fact that the Indian IT sector is one of the largest in the country and contributes to around 8% of the total GDP of our economy. And so, analyzing the Nifty IT Index is of paramount importance if we are to truly understand the various sectoral indices. Now, let’s begin with a short overview of the Nifty IT sectoral index.       

What is the Nifty IT index?

The Nifty IT Index is a collective of companies operating in the Information Technology sector. It features 10 companies that generate more than half of their turnover from various IT activities such as support and maintenance, IT infrastructure, telecommunication and networking, software development, and hardware manufacturing.  

The Nifty IT Index has been carefully constructed to capture the true essence and performance of the Indian Information Technology sector as a whole. This makes the index the perfect benchmarking tool for traders, investors, and mutual fund managers looking to track and measure their performance with that of the sector.  

What are the constituents of the Nifty IT index?

Here’s a list of 10 constituents of the Nifty IT Index and their respective index weightage.

Name of the company	Index weightage
Infosys	26.42%
Tata Consultancy Services	25.92%
Wipro	9.84%
Info Edge (India)	9.29%
HCL Technologies	9.06%
Tech Mahindra	8.89%
Larsen & Toubro Infotech	4.07%
Mphasis	3.37%
MindTree	2.04%
Coforge	1.11%

Let’s now take a look at a short overview of each of the constituents in this index and their core businesses. 

1. Infosys

• Founded in 1981, Infosys is probably the most famous and recognizable company in India.
• The company provides a plethora of different IT and IT-related services to its clientele. 
• Software development, digital transformation, and implementation of automation, machine learning, and artificial intelligence are a few of the services that Infosys are known for. 

2. Tata Consultancy Services

• Tata Consultancy Services, also known as TCS, was established in 1968 and is a part of the Tata Group of companies. 
• The company is essentially a like-for-like rival of Infosys and provides various information technology services including consultancy services. 
• TCS is well known for its cloud computing, blockchain, enterprise applications, automation and AI, cyber security, and analytics services.

3. Wipro

• Incorporated in 1945, Wipro is the brainchild of Mr. Hasham Premji.
• The core business of the company is providing information technology consulting services, business process services, cloud services, and cybersecurity. 
• Just like TCS and Infosys, Wipro’s presence extends beyond India and onto other countries as well. 

4. Info Edge (India)

• Established in 1995, Info Edge (India) is primarily an internet company with its headquarters in Noida. 
• The company, through its various brands, is into the online classifieds business in the fields of recruitment, marriage, education, and real estate.  
• Naukri, 99acres, Shiksha, Jeevansathi, Firstnaukri, and Quadrangle are a few of the brands controlled by the company. 

5. HCL Technologies

• HCL Technologies is a subsidiary of the HCL Group of companies, which was formally incorporated in 1991.
• The company is quite well known for its enterprise focused IT services, operational technology services, digital business consulting, data and analytics, and cloud computing services.     

6. Tech Mahindra

• Established in 1986, Tech Mahindra is a part of the Mahindra & Mahindra Group of Companies. 
• Another IT service provider, the company is involved in cyber security, enterprise business solutions, networking services, digital supply chain, business process services, and intelligent automation, among others. 
• Tech Mahindra acquired the erstwhile Satyam Computers for around Rs. 2,889 crores. 

7. Larsen & Toubro Infotech

• Larsen & Toubro Infotech, a group company of the engineering behemoth L&T, was incorporated in 1996. 
• Ever since its incorporation, the company has been in the business of providing cloud and infrastructure services, IT consulting services, cyber defence, and building agile enterprises.

8. Mphasis

• Established in 2000, Mphasis is a Bengaluru-based company that provides IT related services. 
• The company specializes in infrastructure technology and application outsourcing services, architecture guidance, application development, application integration, and application management. 

9. MindTree

• Incorporated in 1999, MindTree is currently a part of the L&T Group of companies. 
• Larsen & Toubro did a hostile takeover of the company by buying its shares from the secondary market. 
• MindTree provides services such as IT consulting, customer experience, cloud, automation and AI, and enterprise solutions, among others. 

10. Coforge

• Another IT software and services provider, Coforge was founded in 1992. 
• The company provides an extensive range of IT related services including digital process automation, digital innovation and transformation, application services, artificial intelligence, data and insights, business process services, and cloud services, among others.  

Trading in Nifty IT

The National Stock Exchange earlier had derivative contracts, both futures and options contracts, with the Nifty IT Index as the underlying asset. However, due to lack of interest from the trader community, which led to a decline in liquidity, the exchange chose to discontinue Nifty IT derivative contracts. So, as of now, trading in the Nifty IT sectoral index is not possible.

S&P BSE Information Technology: The BSE alternative

The Nifty IT Index is a selective sectoral index that is made up of only a few major companies operating within the Information Technology sector. The S&P BSE Information Technology index, on the other hand, is a far more extensive index that includes almost all of the IT sector companies that are listed on the Bombay Stock Exchange. As a matter of fact, the S&P BSE Information Technology index comprises 49 different stocks of IT companies. This includes the 10 constituents that we saw above as well. 

Wrapping up

With this, we’ve come to the end of this chapter on the Nifty IT index. We still have two more major sectoral indexes to look at, which we will be taking up in the forthcoming chapters of this module. 

A quick recap

• The Nifty IT Index is one of the key sectoral indices in the Indian stock market owing to the fact that the Indian IT sector is one of the largest in the country.
• It is a collective of companies operating in the Information Technology sector. It features 10 companies that generate more than half of their turnover from various IT activities.
• The companies whose stocks constitute this index include Infosys, Tata Consultancy Services, Wipro, Info Edge (India), HCL Technologies, Tech Mahindra, Larsen & Toubro Infotech, MphasiS, MindTree and Coforge.
• As of now, trading in the Nifty IT sectoral index is not possible.   
• The BSE’s equivalent IT sectoral index is the S&P BSE Information Technology.
• It includes almost all of the IT sector companies that are listed on the Bombay Stock Exchange. As a matter of fact, the S&P BSE Information Technology index comprises 49 different stocks of IT companies.