What Is NIFTY?

Nifty is an equity benchmark index in India introduced by the National Stock Exchange on April 21, 1996. Since then, it has risen 13x from 835 to 10,800. Other Nifty indices were established later in the same year.

 

History of Nifty

Nifty 50, the term can be broken down into two separate words: National and Fifty. Nifty 50 and BSE Sensex are the two main stock indices in India. Nifty 50 is a stock market index that comprises the weighted average stocks of 50 of the largest Indian companies that are listed on the National Stock Exchange. It covers around 13 sectors and is one of the most commonly traded contracts. 

A brief rundown through the history of Nifty: The Nifty 50 index was launched on April 22, 1996, and is one of the many indices of Nifty. The base year for Nifty is considered as 1995 and the base value is set at 1000. Between the years 2008 & 2012, the index’s share of NSE’s market capitalization fell from 65% to 29% due to the rise of sectoral indices. On June 26th, 2009, the initial calculation of the index by full market capitalization was changed to a free-float methodology. 
 

How is Nifty calculated?

Since 2009, Nifty is calculated using the free-float market capitalization method. This method takes into consideration changes in the index and actions like stock splits and rights, without affecting the value of the index.  

The index reflects the stock values relative to the based period.

Index value= Current market value / (Base Market capital × Value of Base Index)

In the above formula, the market value is calculated as the product of several shares and the market price per share. As the Nifty value is based on the weighted cost, the companies with massive stocks have a greater impact on the value as compared to those companies with smaller capital. 
 

Components of Nifty

Sr No. Company Name Sector Sr No. Company Name Sector
1 Axis Bank Banking 26 IndusInd Bank Banking
2 Adani Ports and SEZ Infrastructure 27 Infosys Information Technology
3 Asian Paints Consumer Goods 28 JSW Steel Steel
4 Bajaj Auto Automobile 29 Kotak Mahindra Bank Banking
5 Bajaj Finance Finance 30 Larsen and Turbo Construction & Engineering
6 Bajaj Finserv Finance 31 Mahindra and Mahindra Automobile
7 Bharat Petroleum Energy - Oil & Gas 32 Maruti Suzuki Automobile
8 Bharti Airtel Telecomm-Service 33 NTPC Electric Utility
9 Britannia Industries FMCG 34 Nestle India FMCG
10 Cipla Pharmaceuticals 35 Oil & Natural Gas Energy - Oil & Gas
11 Coal India Mining 36 Power Grid Electric Utility
12 Divi’s Lab Pharmaceuticals 37 Reliance Industries Energy - Oil & Gas
13 Dr. Reddy’s lab Pharmaceuticals 38 SBI Banking
14 Eicher Motors Automobile 39 SBI life insurance Insurance
15 Grasim Industries Cement & Cement Products 40 Shree Cements Cement
16 HCL Tech Information Technology 41 Sun Pharma Pharmaceuticals
17 HDFC bank Banking 42 Tata Consultancy Information Technology
18 HDFC life Insurance 43 Tata Consumer products FMCG
19 Hero MotoCorp Automobile 44 Tata Motors Automobile
20 Hindalco Industries Aluminium 45 Tata Steel Steel
21 Hindustan Unilever FMCG 46 Tech Mahindra Information Technology
22 Housing development finance Finance 47 Titan Company Other Apparels & Accessories
23 ICICI Bank Banking 48 UPL Agro Chemical
24 Indian Oil Energy - Oil & Gas 49 Ultratech Cement Cement
25 ITC Tobacco 50 Wipro Information Technology

 

Scrip Selection Criteria

The criteria for inclusion in the benchmark Nifty index are as follows:

  1. The stock should have traded at an average impact cost of 0.5% or less in the past 6 months and should have at least twice the float-adjusted market capitalization value compared to the latest small index constituent.
  2. The company should be based in India and traded on the exchange. 
  3. Stocks of the company should be available for the F&O trading segment on the NSE.
  4. Market capitalization, trading frequency, and liquidity are also taken into consideration. 

 

Nifty Sectoral Indices

Nifty has a set of indices to study the performance of stocks of various sectors. These sectoral indices also set a benchmark for competing industries belonging to the sector. The Nifty sectoral indices are as follows: 

  1. Nifty Auto index
  2. Nifty Bank Index
  3. Nifty Consumer Durables index 
  4. Nifty financial service index
  5. Nifty FMCG index
  6. Nifty Healthcare index
  7. Nifty IT index 
  8. Nifty Media index
  9. Nifty Metal index
  10. Nifty Oil and Gas index
  11. Nifty Pharma index
  12. Nifty Private bank index
  13. Nifty PSU bank index
  14. Nifty realty index

Frequently Asked Questions

Nifty is a market index consisting of 50 financially well-established companies listed on the National Stock Exchange of India.

No, one cannot buy Nifty, as it is an index and not an individual stock. However, one can invest in Nifty exchange-traded funds or index funds.

Nifty is calculated using 50 large stocks that are actively traded on NSE and selected from 13 different sectors. 

As of March 2019, Nifty 50 represents about 66.8% of the free-float market capitalization of stocks listed on the National Stock Exchange. 
 

The 50 stocks of Nifty are the stocks belonging to the 50 largest companies of India that form the components of Nifty 50. 

Nifty 50 is not an equity but is an equity benchmark index. 

Nifty is created from economic research for those interested in investing and trading in Indian equity. 

Nifty plays an important role as an indicator of stock market movements. And based on this index, the investor decides to invest in the market.