Nasdaq 100

Key Takeaways:

  1. NASDAQ 100 is a stock market index made up of the 100 largest non-finance companies that are actively traded and listed on the Nasdaq Stock Exchange.
  2. The index includes companies from many industries such as retail, telecommunication, transportation, technology, industrial, and media.
  3. Some of the biggest names in the index are from the technology sector such as Facebook, Apple, Amazon, Netflix, and Google (FAANG stocks of Nasdaq 100).
  4. Due to this, the NASDAQ 100 index is sometimes referred to as a technology index.

Nasdaq 100 Index

National Associate of Securities Dealers (NASD) introduced the Nasdaq 100 Index in 1985, along with an index that focused solely on financial companies, the Nasdaq Financial 100 index, which is why the Nasdaq 100 index doesn’t have a single financial company in the index.

To be a part of the index, companies must meet the standards set by Nasdaq. Specifically, the exchange requires that the companies be listed exclusively on its exchange, in addition to considering a company’s liquidity and market capitalization.

Furthermore, the exchange imposes some more specific requirements, such as being listed on the market for a period of at least 3 months and achieving an average daily volume of 2,00,000 shares.

What is meant by Nasdaq 100?

The Nasdaq 100 Index is a modified cap-weighted index, which means that the stocks are weighted based on the total market value of the outstanding shares. As the stock price of a company changes, so does its weighting in the index.

Intriguingly, the Nasdaq 100 index is not rebalanced often. However, when it does rebalance, the exchange reviews the companies included, re-rank eligible companies, and make adjustments. For instance, Wynn Resorts Ltd. replaced TripAdvisor Inc. in 2017.

How Nasdaq 100 Index is made?

When the exchange decides to review the index, it looks at the share prices and publicly announces share totals. Once they’ve ranked the companies, that ranked 101st to 125th will only remain if they were in the top 100 in the previous year. However, if the companies are not able to move into the top 100 within the year they will be dropped. If a company is ranked over 125, it will be dropped regardless.

For example, consider Company X, an extremely well-known technology company specializing in social media. Due to this, it was able to join the Nasdaq 100 index that year.

However, in the next year, consumers turned towards other upcoming social media, assume Company Z. As Company X became less popular it fell to 108th position in the Nasdaq 100 index.

It will still be able to maintain its position due to its position in the previous year. In yet another year, if Company X still ranked below 100, it will be taken off the index.

What companies are in the Nasdaq 100?

The top 10 companies in the Nasdaq 100 index are:

Company Symbol Weight
Apple Inc AAPL 13.319
Microsoft Corp MSFT 10.111
Amazon.com Inc AMZN 9.892
Tesla Inc TSLA 4.511
Facebook Inc FB 4.039
Alphabet Inc Class A GOOGL 3.691
Alphabet Inc Class C GOOG 3.584
NVIDIA Corp NVDA 2.52
Paypal Holdings Inc PYPL 2.099
Adobe Inc ADBE 1.827

Source: Slickcharts, Data as of 16 Dec 2020

Nasdaq 100 ETF India

In India, Motilal Oswal offers a chance to invest in the Nasdaq 100 index through its Motilal Oswal NASDAQ 100 ETF. The chart below compares its performance with the Nifty 50 index.

Nasdaq 100 ETF India
Source: Google Finance, Tavaga Research

The chart clearly shows the outperformance of the Motilal Oswal NASDAQ 100 ETF over the Nifty 50, since its inception.

The current NAV of the ETF is Rs 911. 1216 and has an expense ratio of 0.54 percent. The size of the fund is Rs 2337.31 crore.

Nasdaq 100 futures

Like a regular futures contract, an index futures contract is a legally binding agreement between the parties to the contract.

It allows investors to buy or sell contact on an index and settle in the future. An index future contact provides a way to speculate on the movement of the price of an index such as the Nasdaq 100 index.

Nasdaq 100 vs S&P 500

S&P 500 is an index made up of the 500 largest publicly listed US companies across various sectors either on the New York Stock Exchange (NYSE) or the Nasdaq Stock Exchange.

It accounts for around 80 percent of the US stock market capitalization and is often regarded as a broad indicator of the country’s equity markets.

Nasdaq 100 is as defined above. The table below indicates the top 5 sectors weighing in the two indices:

Nasdaq 100 vs S&P 500
Source: Tavaga Research

Is Nasdaq 100 a good investment?

The Nasdaq 100 index is a good investment because it provides exposure to the largest companies in the US, outside the financial world. Moreover, it being a passive investment, it has a low expense ratio in India

The only contentious point is that the index seems to be highly-priced at this point in time, given that the markets are touching a new high, almost on a daily basis.

The appropriate way to go forward will be to do SIPs instead of investing a lump sum in the Motilal Oswal Nasdaq 100 ETF. The Nasdaq 100 ETF in India offers a jargon-free diversification for investors.

Nasdaq 100 Share Price

The LTP of the Nasdaq 100 index is 12,738.18 (as of 18th December 2020)

Nasdaq 100 Stocks

The entire list of Nasdaq 100 stocks can be found on this link: https://in.investing.com/indices/nq-100-components