what is the Nifty 50 Index?

What is Nifty 50

 The NIFTY 50 is a benchmark index of NSE (National Stock Exchange )that represents the better-performed 50 companies. It was one of the two main stock indices used by Indians. another one was BSE SENSEX. 

Nifty 50 is owned and managed by India Index Services & Products Limited which is a wholly-owned subsidiary of the NSE Strategic Investment Corporation Limited. NSE INDICES had a marketing and licensing agreement with Standards & Poors for co-branding equity indices til 2013. The Nifty 50 index was launched on 22 April 1996 and is one of the many stock indices of Nifty.

The NIFTY 50 index has shaped up to be the largest single financial product in India with an ecosystem consisting of Traded funds (onshore and offshore), exchange-traded options at the National Stock Exchange, and futures and options abroad at the Singapore Exchange. NIFTY 50 is the world’s most actively traded contract.

The NIFTY 50 index covers around 13 sectors up to 2021 in the economy of India.

Understanding the Nifty 50

                   NIFTY is introduced by NSE for equity markets and it is one of the major stock indexes in India. This index is managed by Indian index services and products (IISL).

NIFTY represents better performed 50 stocks of the National Stock Exchange (NSE) similar to SENSEX, which represents better performed 30 stocks of BSE (Bombay Stock Exchange). This index is a major indicator of market movement.

  • The National Stock Exchange (NSE) is one of India’s leading stock exchanges.
  • NSE provides a fully automated and screen-based trading system.

NIFTY Timeline

  • April- 1993: – Recognition of the National Stock Exchange(NSE) as a stock exchange in India.
  • June-1994: – Wholesale debt marketing goes live.
  • Nov-1994: – Equities Market segment goes to live.
  • May-1998: – Launch of National Stock Exchange’s website : www.nse.co.in
  • Feb-2000: – Commencement of Internet Trading.
  • Jan-2002: – Launch of Exchange Trading Funds (ETFs) in the market.
  • Nov-2009:– Launch of Mutual Funds.
  • July- 2010: – LOI signed with London Stock Exchange.

History of the Nifty 50

                     From  2008 to  2012, the NIFTY 50 index share of the National Stock Exchange’s market capitalization fell from 65% to 29% due to the rise of sectoral indices like Bank NIFTY, NIFTY SERV SECTOR and NIFTY Next 50, etc. The Index NIFTY 50 gives a weightage of 39.47% to Financial services 15.31% to Energy, 13.01% to Information Technology, 12.38% to consumer appliances, 6.11% to Automobiles, and 0% to the agriculture sector.

                    The NIFTY 50 index is a free-float market capitalized index. The index was initially calculated on the basis of the full market capitalization methodology. On 26 June 2009, the method was changed to a free-float methodology. The best period for the NIFTY 50 index is 3 Nov 1995, which marked the completion of one year of operations of the National Stock Exchange Equity Market Segment. The base value of the index has been set at 1000 and a base capital of ₹ 2.06 trillion.

How is the Nifty 50 Calculated?

             The NIFTY 50 index is calculated using the free-float market capitalization-weighted method and This reflects the total market value of all stocks in the index relative to a base period value (November 3, 1995).

Market capitalization, or market cap, is the total value of a company’s shares held by all investors, including the organization itself. Free-float market cap captures the total market value of those shares which are available for public trading, that is, that are not held by company owners or the government.

Using the weighted method means that the component of each stock in calculating the index is assigned to weight according to the total value of its outstanding shares.

 Market capitalization => Shares Outstanding * Current Price

Free-float Market Capitalization => Market Cap * IWF

Index Value => (Current Market Value/Base Market Capital) * 1000

 The current market value is the weighted aggregate market capitalization of all the best performed 50 companies. The base market capital is the weighted aggregate market capitalization of all better-performed 50 companies as in the base period.

How to invest in Nifty 50?

Once an investor made a decision to invest in the NIFTY 50 index, then he or she can explore one of the two ways of investing

1. Derivative Contracts:-

Investors can trade in NIFTY 50 stocks through derivative contracts that are Futures and Options (F&O). These Derivative contracts use the index Nifty as an underlying asset, meaning that the price movements and fluctuations are linked to the NIFTY 50 Index. 

2. Index Mutual Funds &  Exchange Traded Funds (ETF)

For investors who are looking to invest with a long-term perspective in mind and lower risk involved, investing in NIFTY 50 via index mutual funds or an ETF is the best option for those investors. Index Mutual Funds &  Exchange Traded Funds are a type of mutual fund with a portfolio comprising stocks, bonds, indices, and currencies. These are created to track the components of a market index such as  NIFTY 50. 

Objectives of NSE nifty 50

       The total market capitalization of each stock is computed by multiplying it with a float-factor/Investible Weight Factor (IWF). This index considers only shares that are available for public trading and exclude the following categories:

  • Shares are held by company owners and promoters who are insiders.
  • Stocks are held by the government of India.
  • The Shares which are held through American Depositories(shares held by foreigners indirectly through foreign financial institutions which are resided in India)
  • Stocks held by corporate bodies
  • Investments held under Foreign Direct investment
  • Shares held by associate companies 
  • Employee Welfare Trusts 
  • Locked-in shares 

Companies in the Nifty 50

Company NameSymbolSector
Adani PortsADANI PORTSInfrastructure
Apollo HospitalsAPOLLOHOSPHealthcare
Asian PaintsASIAN PAINTConsumer Goods
Axis BankAXIS BANKBanking
Bajaj AutoBAJAJ-AUTOAutomobile
Bajaj FinanceBAJFINANCEFinancial Services
Bajaj FinservBAJAJFINSVFinancial Services
Bharti AirtelBHARTIARTLTelecommunication
Bharat PetroleumBPCLEnergy – Oil & Gas
Britannia IndustriesBRITANNIAConsumer Goods
Coal IndiaCOAL INDIAMetals
Divi’s LaboratoriesDIVISLABPharmaceuticals
Dr. Reddy’s LaboratoriesDR REDDYPharmaceuticals
Eicher MotorsEICHERMOTAutomobile
Grasim IndustriesGRASIMCement
HCL TechnologiesHITECHInformation Technology
HDFCHDFCFinancial Services
HDFC LifeHDFCLIFEFinancial Services
Hero MotoCorpHEROMOTOCOAutomobile
Hindalco IndustriesHINDALCOMetals
Hindustan UnileverHINDUNILVRConsumer Goods
IndusInd BankINDUSINDBKBanking
InfosysINFYInformation Technology
ITC LimitedITSConsumer Goods
Kotak Mahindra BankKOTAK BANKBanking
Larsen & ToubroLTConstruction
Mahindra & MahindraM&MAutomobile
Maruti SuzukiMARUTIAutomobile
Nestlé IndiaNESTLEDConsumer Goods
NTPCNTPCEnergy – Power
Oil and Natural Gas CorporationONGCEnergy – Oil & Gas
Power Grid Corporation of IndiaPOWERGRIDEnergy – Power
Reliance IndustriesRELIANCEEnergy – Oil & Gas
State Bank of IndiaSBINBanking
SBI Life Insurance CompanySBILIFEFinancial Services
Shree CementsSHREECEMCement
Sun PharmaceuticalSUNPHARMAPharmaceuticals
Tata MotorsTATAMOTORSAutomobile
Tata SteelTATASTEELMetals
Tata Consultancy ServicesTCSInformation Technology
Tata Consumer ProductsTATACONSUMConsumer Goods
Tech MahindraTECHMInformation Technology
Titan CompanyTITANConsumer Durables
UltraTech CementULTRACEMCOCement
United Phosphorus LimitedUPLChemicals
WiproWIPROInformation Technology
Companies in Nifty 50 index

Nifty 50 Vs Sensex

Full-FormNational and FiftySensitive and Index
OwnershipNSE subsidiary, IISL.Bombay Stock Exchange (BSE).
Base Number1000100
Base PeriodNovember 3rd, 19951978-79
Base CapitalINR 2.06 TrillionNA
Number of StocksTop 50 companiesTop 30 companies
Number of sectors24 sectors13 sectors
Foreign ExchangesSingapore Stock Exchange (SGX) and Chicago Mercantile Exchange (SME)EUREX and stock exchanges of BRCS nations
Differences between Nifty 50 Vs Sensex

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