Who doesn’t love traveling? We all know the global tourism industry has boomed in the last decade, especially post-Covid, and India is no different story. In fact, the Indian Tourism sector ranks among the fastest-growing economic sectors in the country. No wonder the stocks related to the tourism industry are in the spotlight. 

Given the rising interest in the tourism industry, NSE Indices, a subsidiary of the National Stock Exchange (NSE), recently launched a new thematic index – the Nifty Tourism Index, which will track the performance of companies that represent the travel and tourism industry. 

But before you jump in with your suitcase full of rupees, let’s unpack what the Nifty Tourism Index is all about. 

Launched in June 2024, the Nifty India Tourism Index is a comprehensive benchmark designed to track the performance of India’s leading companies from travel and tourism related sectors like airlines, hotels, luggage, travel aggregator, quick service restaurants (QSR), etc ✈️🧳.  

Mr. Mukesh Agarwal, CEO, NSE Indices, said, “The Nifty India Tourism Index aligns with NSE’s vision to provide innovative indices in line with market trends. The launch of the Nifty Tourism index will facilitate creation of products which will create opportunity for asset managers to invest in the tourism industry, thereby providing valuable tools for investors aiming to capitalize on the growth and resilience of this vibrant industry.” 

By providing a clear representation of India’s tourism sector, the Nifty India Tourism Index will serve as a valuable tool for investors, analysts, and industry participants to gauge the performance of the travel and tourism industry. 

The index will also serve as a benchmark for asset managers and a reference for passive funds like exchange-traded funds, index funds, and structured products.

Here’s the composition of the Nifty Tourism Index:

The index will comprise of a maximum of 30 stocks from industries related to tourism sector and should be within the Nifty 500 universe. They will be selected based on their six-month average free-float market capitalization.  

Only companies forming part of the following industries will be eligible to be included at the time of review.  

Currently there are 17 stocks included in the index with InterGlobe Aviation (Indigo Airlines) having the highest weight at 20.01%. Other stocks include VIP Industries (luggage manufacturing), Indian Hotels, BLS International (visa processing and tech-enabled citizen service provider), Chalet Services (hotel), Easy Trip Planners, and Mahindra Holiday & Resorts.  

To maintain diversification, no individual stock can exceed 20% of the index’s weight. The index will be rebalanced quarterly to align with market fluctuations.

Here are the top constituents of the index:

With the base year set as April 1, 2005, and a base value of 1000, the index undergoes a semi-annual reconstitution to ensure it accurately reflects the industry’s evolving landscape. 

You must be wondering, what is the purpose of this index though? The Nifty India Tourism Index will serve multiple purposes, including benchmarking fund portfolios and launching index funds, ETFs, and structured products. By tracking the performance of companies linked to the tourism sector, investors can also target their investments accordingly and have a means of measuring their performance. 

Why Should You Care?

India’s tourism industry is on a skyrocketing journey. Over the past year, the Nifty India Tourism Index has delivered a remarkable gain of 41.98%, with a stellar 5-year compound annual growth rate (CAGR) of 19.49%. 

A growing middle class with rising disposable income is leading to a surge in travel enthusiasts. More people are taking more trips, venturing beyond familiar destinations, and seeking unique experiences. This translates to a booming business for travel and tourism companies, which is where the Nifty Tourism Index comes in. 

By investing in a fund that tracks this index, you’re essentially putting your money on the growth potential of Indian tourism. In fact, Tata Mutual Fund recently launched India’s first tourism thematic fund. It is a passive fund that will replicate the performance of the Nifty Tourism Index. This means it will invest exactly in those companies which are part of the tourism index. 

Imagine yourself profiting as more people explore the vibrant landscapes of India, from the majestic Himalayas to the serene beaches of Goa.

How Does the Nifty Tourism Index Work?

The Nifty Tourism Index selects companies based on a clear set of criteria. Here’s a breakdown: 

Things to Consider Before Investing in instruments in the Nifty Tourism index

While the Nifty Tourism Index offers exciting possibilities, it’s important to be aware of the potential risks: 

Wrapping up

As India cements its status as a premier global tourism destination, the Nifty India Tourism Index highlights the sector’s vast potential and the promising opportunities it offers for the future. For investors looking to diversify their portfolios and tap into the sector’s growth, the index will provide a thorough and well-structured investment opportunity.  

With the launch of this index, we will see more AMCs launching their tourism funds, which will give investors a convenient way to gain exposure to a high-growth sector, track its performance and potentially benefit from the travel boom.  

However, it’s a well-established fact that thematic funds are inherently cyclical. Profiting from them requires precise market timing, which significantly increases their risk. They are not suitable for the average investor. Hence, it’s a good idea to explore diversified equity funds to balance out the concentration risk that comes with thematic funds (like tourism in this case). 

So, pack your metaphorical bags, explore the Nifty Tourism Index, and see if it’s the perfect travel companion for your investment journey!

Learn more about Nifty Tourism Index in the following video:

 

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