You might have heard people talking about the Nifty or the Nifty 50, especially if you’re interested in finance or investing. But what exactly is Nifty and why is it important? In this blog, understand what is nifty / what is nifty 50 in simple and easy-to-understand way.
List of contents
- what is nifty
- What is nifty 50
- How is Nifty calculated?
- How can you invest in the Nifty 50 index?
- Top 10 high weightage company in nifty 50
- Major milestone of nifty?
- Conclusion
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What is nifty
Nifty is derived from “National Stock Exchange” and “fifty. Nifty meaning is National Stock Exchange Fifty or Nifty 50. It started on 22 April 1996 as CNX Nifty and got its new name, Nifty 50, in 2015 and managed by NSE Indices Limited.
What is nifty 50
Nifty is a stock market index that tracks the performance of the 50 largest companies listed on the National Stock Exchange of India (NSE). It is one of the most popular stock market indices in India, and is widely used by investors to track the performance of the Indian stock market.
It’s designed to give investors and traders a quick and easy way to gauge how well the Indian stock market is doing as a whole. When you hear people say, “The Nifty went up today,” they mean that the average price of these top 50 stocks increased, which generally indicates a positive day for the Indian stock market.
It covers following sectors of the Indian economy which include – automobiles, Banking and financial services, cement, chemicals, consumer goods (FMCG), energy information technology (IT), media, metals, oil and gas, pharma, real estate, telecom etc.
How is Nifty calculated?
Nifty 50 is calculated using the float-adjusted and market capitalization weighted method.
The formula for Index Value is.
Index value = Current Market Value / (Base Market Capital x 1000)
Current market value here represents the weighted total market cap of all 50 companies and base market capitalization of the Nifty index is 1000 for base year 1995.
Market capitalization = share Price * Equity capital
Free Float Market Capitalization = share Price * Equity Capital * Investable weight factor
How can you invest in the Nifty 50 index?
- The first option is to invest directly in Nifty 50 stocks. You can choose and buy individual stocks of the 50 companies that make up the Nifty index.
- The second option is to invest in Nifty through Index Mutual Funds and Exchange Traded Funds (ETFs). These funds are designed to replicate the performance of the Nifty index as a whole. These funds make it easy to invest in the entire index without buying each stock separately.
Top 10 high weightage company in nifty 50
| Company Name | Sector | Weightage |
|---|---|---|
| HDFCBANK | Financial Services | 13.30 |
| RELIANCE | Oil & Gas | 9.21 |
| ICICIBANK | Financial Services | 7.74 |
| INFY | Information Technology | 5.95 |
| ITC | FMCG | 4.57 |
| LT | Construction | 4.24 |
| TCS | Information Technology | 4.20 |
| Axis bank | Financial Services | 3.34 |
| Kotak mahindra bank | Financial Services | 2.96 |
| BHARTIARTL | Telecommunication | 2.71 |
Major milestone of nifty?
1) April 22, 1996: nifty 50 index was launched on, with a base value of 1000
2) January 8, 2002: first ETF in India, Nippon India Nifty BeES, was launched
3) 2003: Bank nifty index, also known as the Nifty Bank, was introduced first time.
4)2015: it received its new name, Nifty 50, which was formerly known as CNX Nifty.
5) 29 Jan 2007: It touched the 5000 mark
6) 16 May 2014: It touched the 7000 mark
7) 21 Aug 2017: It touched the 10000 mark
8) 5 Feb 2021: It touched the 15,000 mark
9) 25 Oct 2021: It touched the 18,000 mark
10) 11 Sep 2023: It touched the 20,000 mark
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Conclusion
In this blog, we’ve discussed “what is nifty”. Nifty is like a scoreboard for the Indian stock market. It shows us how well the top 50 companies are doing. When Nifty goes up, it means these companies are doing well, and when it goes down, they’re not. Understanding Nifty helps us get a quick glimpse of the overall health of the Indian stock market.
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