Beyond the benchmark: What NSE's new India Internet index misses

On February 28, the National Stock Exchange (NSE) launched the NIFTY India Internet & E-Commerce Index. Another one of NSE’s thematic indices, it’s focused on companies that conduct business through online platforms. The idea behind the index—or indeed, indices at large—is to create a benchmark for asset managers and to be a reference index tracked by passive funds (exchange-traded funds (ETFs), index funds, and other structured products).

The best way to think of an equity market index would be to imagine a sushi platter. Say you walk into an upscale Japanese restaurant with a vague craving for sushi, but you aren’t very specific about what you want. Your tastes are global, but not very refined yet. So, you go for a sushi platter—something that exposes you to a wide variety of fillings and wrappings.

That is exactly what indices do. They allow investment managers to fulfil a general craving for investment exposure without them having to scratch their heads over a specific stock. At present, NSE offers 50-plus such curated indices, offering exposure to stocks of a particular size (small-, mid-, and large-cap), sector (auto, banks, etc.), big domestic economic trends (housing, tourism, ESG, and most recently, India Internet).

The creation of the NIFTY India Internet & E-Commerce Index (NI3) couldn’t have come soon enough. Today, much of our economic transactions—be it grocery, fashion purchases, and travel booking, for instance—increasingly happen digitally. This holds true even beyond India’s large metros. For instance, more than 35% of fashion and beauty and personal care e-commerce happens outside metros, 94% of online travel platform Ixigo’s bookings have a non-metro leg in travel, and 74% of agents of PB Fintech’s B2B offering (PB Partners) are based in Tier-2 cities and beyond.