Nifty 50

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. 

Scrip selection Criteria

The criteria for inclusion in the benchmark Nifty index are as follows:
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.
The company should be based in India and traded on the exchange. 
Stocks of the company should be available for the F&O trading segment on the NSE.
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