NIFTY is the Indian stock market index created and christened by the National Stock Exchange on April 22, 1996. It is a conjunction of two different words: the National Stock Exchange and Fifty.
The NIFTY 50 is a benchmark-based index. It is also one of the major indices of the NSE. It consists of the top 50 companies’ equity stocks out of the total 1600 stocks traded in the stock exchange. The stocks range through over 12 sections of the Indian economy: information technology, consumer goods, financial services, entertainment, media, banks, metals, cement, automobiles, pharmaceuticals, telecommunications, fertilisers and pesticides, energy, and other services.
NIFTY is one of the two major national stock indices. The other one is SENSEX, an index of the Bombay Stock Exchange (BSE). NIFTY is promoted by NSE Indices, previously known as India Index Services and Products (IISL). It is a wholly-owned subsidiary of the National Stock Exchange Strategic Investment Corporation Limited, now NSE India Ltd. NIFTY 50, its flagship product, follows the direction and trends of the blue-chip businesses listed on the exchange. These blue-chip companies are the most liquid, biggest listed Indian securities.
The NSE consists of several indices: the NIFTY 50, NIFTY Bank, NIFTY IT, and the NIFTY Next 50. NSE is also a pioneer of Futures and Options (F&O), a segment that deals in derivatives (financial contracts deriving their value from underlying stocks) through this segment.
The eligibility criteria that have been formulated for a company to get listed on the NIFTY Index are as follows:
The NIFTY Index is reassembled every six months and tracks the performance of each stock over this period. Based on how a stock performs, and whether the company and the stock meet all the eligibility criteria given above, it could be retained or eliminated. In the cases of adding or removing stocks, the concerned companies are notified via a publication four weeks before the rejigging.
Other than the processes mentioned above, stock can be rejigged when a company goes through any major corporate decisions, including mergers, spin-offs, suspensions, or a mandatory delisting.
NIFTY, via its exchange, is instructed to carry out a quarterly screening of companies to verify their compliance to the portfolio diversification regulations for Index-related Funds and ETFs as per SEBI guidelines, notified on 10th January 2019.
NSE Indices formerly had a publicity and licensing agreement with Standard & Poor for jointly branding the equity indices up to 2013. On April 22, 1996, the NIFTY 50 Index was launched, and is still the major stock index of NIFTY.
NIFTY 50 has turned out to be the country’s most significant financial product entity, with a range of exchange-traded funds both onshore and offshore, and also exchange-traded fund Options at NSE. Futures and options available at the SGX NIFTY 50 abroad are the most actively traded contract globally, volume-wise.
The NIFTY 50 index consists of 12 sectors as per the latest April 2021 reports of the Indian economy and fund managers, with investments in the Indian markets.
The NIFTY 50 Index constitution is as follows: 39.47% weightage to the financial services, 15.31% to the Energy Sector, 13.01% to the IT Sector, 12.38% to the consumer goods sector, 6.11% to the Automobiles sector, and 0% of the total to the agricultural industry.
Company Name Ticker/Symbol Sector
Adani Ports | ADANIPORTS | Infrastructure |
Asian Paints | ASIANPAINT | Consumer Goods |
Axis Bank | AXISBANK | Banking |
Bajaj Auto | BAJAJ-AUTO | Automobile |
Bajaj Finance | BAJFINANCE | Financial Services |
Bajaj Finserv | BAJAJFINSV | Financial Services |
Bharti Airtel | BHARTIARTL | Telecommunication |
Bharat Petroleum | BPCL | Energy – Oil & Gas |
Britannia Industries | BRITANNIA | Consumer Goods |
Cipla | CIPLA | Pharmaceuticals |
Coal India | COALINDIA | Metals |
Divi’s Laboratories | DIVISLAB | Pharmaceuticals |
Dr. Reddy’s Laboratories | DRREDDY | Pharmaceuticals |
Eicher Motors | EICHERMOT | Automobile |
Grasim Industries | GRASIM | Cement |
HCL Technologies | HCLTECH | Information Technology |
HDFC | HDFC | Financial Services |
HDFC Bank | HDFCBANK | Banking |
HDFC Life | HDFCLIFE | Financial Services |
Hero MotoCorp | HEROMOTOCO | Automobile |
Hindalco Industries | HINDALCO | Metals |
Hindustan Unilever | HINDUNILVR | Consumer Goods |
ICICI Bank | ICICIBANK | Banking |
IndusInd Bank | INDUSINDBK | Banking |
Infosys | INFY | Information Technology |
Indian Oil Corporation | IOC | Energy – Oil & Gas |
ITC Limited | ITC | Consumer Goods |
JSW Steel | JSWSTEEL | Metals |
Kotak Mahindra Bank | KOTAKBANK | Banking |
Larsen & Toubro | LT | Construction |
Mahindra & Mahindra | M&M | Automobile |
Maruti Suzuki | MARUTI | Automobile |
Nestlé India | NESTLEIND | Consumer Goods |
NTPC | NTPC | Energy – Power |
Oil and Natural Gas
Corporation |
ONGC | Energy – Oil & Gas |
Power Grid Corporation
of India |
POWERGRID | Energy – Power |
Reliance Industries | RELIANCE | Energy – Oil & Gas |
State Bank of India | SBIN | Banking |
SBI Life Insurance Company | SBILIFE | Financial Services |
Shree Cements | SHREECEM | Cement |
Sun Pharmaceutical | SUNPHARMA | Pharmaceuticals |
Tata Motors | TATAMOTORS | Automobile |
Tata Steel | TATASTEEL | Metals |
Tata Consultancy Services | TCS | Information Technology |
Tata Consumer Products | TATACONSUM | Consumer Goods |
Tech Mahindra | TECHM | Information Technology |
Titan Company | TITAN | Consumer Durables |
UltraTech Cement | ULTRACEMCO | Cement |
United Phosphorus Limited | UPL | Chemicals |
Wipro | WIPRO | Information Technology |
A team of experts at the NSE Indices Ltd. operates the NIFTY share index. It has created the Index Advisory Committee that utilises its expertise and guides solutions to large-scale problems related to the equity indices.
The NIFTY 50 Index and its various products are calculated depending on the number of tradable shares, also known as the free float, included and their market cap weighed in. This methodology, which displays the average market value of stocks available in the index in a specific set period, forms the basis of the process of finding out the stocks’ average market value. This fixed period is known as the base period. For the NIFTY 50 Index, the period starts from November 3, 1995, wherein the base value of this stock index is set at 1000 points, and the base capital is at ₹ 2.06 trillion.
An index like the NIFTY 50 helps in choosing a stock, as selecting a company from an ocean of shares can be pretty tricky. So that is where the stock index becomes usable. It demonstrates the general standing of the overall market. It can be used to assess the value of any stock over a duration to calculate how it has performed. These instances of favorability of a stock index make picking stocks simpler by marking the way how the market moves.
The stock index assesses the stock market’s overall direction. And as we know, we have two major stock indices — the NIFTY, which is the NSE’s index, and Sensex, which is the BSE’s index.
The formula to calculate the price listed in the index is mentioned below:
Index valuation = Current market value / (Base Market Capital * 1000)
The method followed in making this calculation also includes the changes in corporate decisions, which consist of rights issues, stock splits, etc.
As discussed, the NIFTY share market index is a benchmark standard against which all other equity stock markets in India are compared and measured. Thus, NSE carries out frequent index inspections to ensure that it stays stable and continues as the gold standard in the Indian stock market.
Broad-based indices like the NIFTY and the Sensex are also used as a standard benchmark for the Mutual Funds industry to measure their performance comparatively. The NIFTY is much broader than the two indices, thus giving the Indian financial market a more comprehensive measure. Also, NIFTY ranked the highest closing numbers on October 17, 2019, with auto, banking, metal, and energy sectors providing the leading highs.
A stock index is simply a collection of different stocks of similar market values bundled together through the standardised method of averages, which helps in measuring the performance of all the stocks included. All stock prices tick due to two possible reasons; news about a company, like a product launch, or the closing of a factory, among others, or information about a country like a potential nuclear threat or budget announcement, among others. The application of the index is to absorb the latter motion, the change in the stock market, as a unit. That is, the happenings in the country is often represented by the stock index.
Usually, indices act as a source of guidance for the investors. A glance at the index shows us where the market stands. Most of the time, the markets that are represented by the stock indices become very useful in precisely indicating the latest information, like any major issue as discussed in the previous points. The stock indices, from time to time, tend to be a good forecaster of certain events that are going to occur in the future in the economy. Also, as stocks held by an investor are sort of illiquid, the index is a leading reflection of how the entire portfolio will perform.
Recently, indices have become the face of action and find direct applications inside finance through index funds and index derivatives. They are also used by investment managers actively looking to beat the indices, also forming fund structures that are similar, by applying varying strategies. Index funds are pools of capital that passively invest money in the index. Index derivatives assist traders and investors economically in changing their risk exposure to an index, called hedging, and in placing forecasting bets about index movements, called speculation.
The importance of index derivatives has become evident through hedging and has become a significant part of managing risk in modern finance. These use-cases of the indices have set up a multi-trillion dollar industry around the world, and they are in a way crucially in sync with the market indices. Another significant implementation of an index is to measure a fund manager's performance. A fund manager deploys capital for their investors, into equity, debts, or a mixture of both markets via a mutual fund or maybe a hedge fund. Their performance needs to be compared to a standard base benchmark, which usually is the indices.
The S&P CNX Nifty, or now simply the NIFTY, is formulated after solid research by a panel of market experts covering all the companies before they get listed on the index. Close to a billion metrics were used to make the S&P CNX Nifty index rules, the results of which are elementary:
(i) the proper size to use is 50,
(ii) stocks taken into account for the S&P CNX Nifty must be liquid as defined by the impact cost method,
(iii) the most prominent 50 stocks which meet the criteria will be chosen for the index.
The formation of S&P CNX Nifty is contrary to the traditional methods that have been considered for index formation in the previous years, where indices were created out of instinct and lacked any scientific calculations. The efforts that made up the S&P CNX Nifty is well-acknowledged globally as a leading example of accurately understanding how to create a stock market index.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.
Open Demat Account &
Trade @ Rs15 per order.
“Filing of complaints on SCORES – Easy & quick”
Please note that by submitting the above mentioned details, you are authorizing TradeSmart to call and email you and also to send promotional communication even though the contact number may be registered under DND.