NSE Plans to Review Market Indices

June 22, 2017
NSE Plans to Review Market Indices

NSE Plans to Review Market Indices

By Modupe Gbadeyanka

​The Nigerian Stock Exchange (NSE) has indicated its intention to review some of the market indices as normally done.

The stock market regulator, in a statement issued on Wednesday, disclosed that the indices to be reviewed include the NSE 30, NSE Consumer Goods, NSE Banking, NSE Insurance, NSE Industrial, NSE Oil & Gas and the NSE Lotus Islamic Indices.

NSE explained that these indices are normally reviewed bi-annually (June and December) except for NSE Pension index that is reviewed once in the year (December).

However, the stock exchange stated that after the exercise, the composition of these indices would take effect from Saturday, July 1, 2017, stressing that after the review, entry/re-entry as well as exit of some major companies would be witnessed.

The NSE-30 and NSE Industrial Indices are modified market capitalization index with the numbers of included stocks fixed at 30 and 10, respectively.

The Stocks are selected based on their market capitalization from the most liquid sectors. The liquidity is based on the number of times the stock is traded during the preceding two quarters. To be included, the stock must have traded for at least 70 percent of the number of times the market opened for business.

The exchange said it was aware that the number of the stocks included in some of the indices may not be practically suitable for optimal portfolio diversification; however, the numbers would be reviewed as sector conditions change.

The Nigerian bourse began publishing the NSE 30 Index in February 2009 with index values available from January 1, 2007.

On July 1, 2008, the NSE developed four sectoral indices and developed the NSE Pension Index in 2013, with a base value of 1,000 points, designed to provide investable benchmarks to capture the performance of specific sectors.

The sectoral indices comprise the top 15 most capitalized and liquid companies in the Insurance and Consumer Goods sectors, top 10 most capitalized and liquid companies in the Banking and Industrial Goods sector and the top seven most capitalized and liquid companies in the Oil & Gas sector.

The indices, which were developed using the market capitalization methodology, are rebalanced on a biannual basis -on the first business day in January and in July.

Modupe Gbadeyanka

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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