Finance

Nifty 50 index

Nifty 50 index

What is an Index?
An index is a method of measuring fragments of the stock market. An index is a tool that obtains its value from other instruments or indices. This index may be weighted to show the market capitalization of its components or to show a simple index and the prices of the underlying instruments. Most of the stock market indices are weighted.

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Meaning of Nifty
NSE and BSE are the two most important support of Indian stock trading.

  • NSE- National Stock Exchange
  • BSE- Bombay Stock Exchange

NIFTY is the major stock index instigated by the NSE. The word NIFTY comes from two words, `National’ and ‘Fifty’. NIFTY constitute the top stocks of the NSE and which means all the huge stocks of NSE across all sectors are growing up.

Eligibility criteria for companies for Nifty Index listing:

The company must be residence in India and listed on the NSE.

Eligible Securities:

Constituents of the NIFTY 100 index that are there for trading in NSE’s Futures & Options segment are eligible for inclusion in the NIFTY 50 index.

Differential Voting Rights:

Equity securities with DVR are eligible for inclusion in the index subject to attain the following:

  • Market capitalization is measured at a company level by aggregating the market capitalization of the individual classes of security meeting the liquidity criteria for the respective index.
  • Free float of DVR equity class share should be at least 10% of the free-float market capitalization of the company ( and 100% free-float market capitalization of last security in the respective index.
  • It should meet liquidity criteria applicable for the respective index.
  • Upon inclusion of DVRs in the index, the index may not have a fixed number of securities. For example, if the DVR of an existing NIFTY 50 constituent is included in NIFTY 50, the NIFTY index will have 51 securities but continue to have 50 companies.

How is Nifty calculated?

NIFTY is calculated with the help of the market capitalization-weighted method in which weights are allocated according to the size of the company. This can be used for different purposes such as benchmarking fund portfolios, index-based derivatives, and index funds. •NIFTY 50 possesses and run by India Index Services and Products Ltd. (IISL).

The main factors to be considered while calculating are as follows:
• 1995 is taken as the base year.
•1000 is the base value.
• NIFTY is based on the basis of 50 actively traded stocks of the NSE.

How is it different from Sensex?

Sensex and Nifty are two different stock market indices that are used to depict the resistance of the stock market. However both are calculated nearly in the same method, there are a few differences between the two of them.  While Nifty is procured from ‘National Fifty’, Sensex is procured from ‘Sensitive Index’. Sensex is controlled by the Bombay Stock Exchange (BSE), while Nifty is controlled by the India Index Services Products Ltd. (IISL), a subsidiary of the National Stock Exchange (NSE).

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Some Nifty 50 Companies:
Reliance Industries Ltd
HDFC Bank Ltd.
Infosys Ltd.
Housing Development Finance Corporation Ltd.
Tata Consultancy Services Ltd.
ICICI Bank Ltd.
ITC Ltd.

Final Thoughts:
Extensive stock market indices in India are Nifty and Sensex. Nifty and Sensex depict the strength of the stock market and have a lot of similarities. But the major difference between them is that Nifty is designed to quantify the performance of 50 top companies, while Sensex has been designed to quantify the performance of 30 well-established companies. The base index value of Nifty is 1000.

 

Author- Moksha Gala
About the Author-Currently, a graduate in the field of accountancy and finance. Commerce has been a part of my life now. Exploring the available choices, finance was always distinct among them. Credits, investments, and markets were always a part of my interest. So decided to embrace finance as a career for life.

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