NIFTY 50
List of NIFTY 50 stocks
The Indian stock market has shown remarkable resilience in terms of achieving better milestones even after the various global perils it has gone through. Due to its tremendous growth, many investors have gone through the effort of taking out their share of profits from this free-flowing growth of the stock market.
To understand the quantum of the Indian stock market, one can look at the broader indices such as Nifty 50, Nifty 100, Sensex and many more. These indices act as a scorecard for the performance of the stock market and the economy over a given period.
- The Indian stock market has seen tremendous growth in terms of value and volume of shares traded.
- This growth in the share market can be tracked with the help of broad market indices such as Nifty 50 and Sensex.
What Is The National Stock Exchange (NSE) Of India?
The National Stock Exchange of India (NSE) Limited is one of the world's largest stock exchanges. It is headquartered in Mumbai and offers state-of-the-art facilities for Indian investors to trade and invest in the stock market. It was also the first stock exchange to provide screen-based trading in India, and it was established in 1992; however, it started its operations in 1994.
The primary objective of the NSE is to maintain transparency and efficiency in the Indian stock market, which further fuels its growth and global dominance. The National Stock Exchange keeps working towards developing better trading systems and processes to become one of the most advanced marketplaces for transacting financial securities.
- The National Stock Exchange of India Limited is India’s leading stock exchange.
- It is the first stock exchange to introduce screen-based or electronic share market trading.
- NSE was established in 1992 and commenced its operations in 1994.
- The primary objective of the National Stock Exchange is to provide and maintain advanced and efficient facilities for trading various types of financial securities.
What Are Stock Market Indices?
Just like the scoreboard of distinct sports matches, indices also act as the benchmark for the accomplishments of the stock market and enable investors to assess its journey for a given period.
Market Indices, often known as indexes, are basically a group of equity shares clubbed together based on specific criteria such as market capitalisation, segments or industries. These indices depict the price movement of the stock market as a whole and inform about the general market sentiments. The shares included in the stock market indices are already listed on stock exchanges and are segregated into 12 broad sectors for easy identification.
The two active stock exchanges in India, the National Stock Exchange and the Bombay Stock Exchange, have introduced their own indices that track the market’s performance. The National Stock Exchange introduced the Nifty 50 index on 22nd April 1996, and the Bombay Stock Exchange introduced the SENSEX on 1st January 1986.
The Nifty 50 includes the top 50 best-performing equity shares listed on the NSE, whereas the SENSEX consists of the top 30 BSE-listed equity stocks. Both of these indices are called benchmark indices because they offer a clear picture of the overall performance and health of the market based on the performance of the best-performing stocks listed in each of the stock exchanges.
- Indices are a basket of equity shares that are formed on the basis of specific criteria such as market capitalisation or segments.
- They evaluate the aggregate performance of the underlying shares and work as a litmus test for the true performance of the stock market.
- Nifty 50 and Sensex are the two national indices that the National Stock Exchange and the Bombay Stock Exchange of India introduced, respectively.
What Is Nifty 50?
The name “Nifty 50” represents the short form for “National Stock Exchange 50”, which is a real-time tracker of the overall market sentiment consisting of the top 50 NSE-listed stocks that are ranked according to their market capitalisation within the index. The top 50 shares included in the Nifty 50, also called the blue-chip stocks, are the most liquid and stable NSE-listed equity shares. These 50 shares represent the companies that have reached their pinnacle of operations, are highly profitable and have become market leaders in their respective segments. Blue-chip companies like Eicher Motors, Apollo Hospital Enterprises, Reliance Industries, and Infosys Ltd. are some of the major conglomerates that are part of the Nifty 50.
Besides the Nifty 50, Nifty also includes other indices such as Nifty Bank, Nifty IT, Nifty Auto and many more, which are created on the basis of various sectors. The Nifty 50, along with other indices, provides a snapshot of how the stocks listed on the National Stock Exchange (NSE) have performed during the day or during a specified time frame. If the Nifty 50 moves with a bearish momentum, it indicates that the stock market as a whole is moving in a bearish trend. On the other hand, when the Nifty 50 moves in a bullish momentum, it indicates that the market is also moving in a bullish trend.
- Nifty 50 consists of the top 50 NSE stocks by market capitalisation. These stocks are the most liquid and reliable stocks among the 2000+ stocks listed on the NSE.
- This index helps the investor to assess the general sentiment of the stock market within a specific time frame.
- Nifty is a broader term that is segregated into other indices, such as Nifty IT, Nifty Auto, and Nifty Bank.
Type Of Nifty Indices
Broad-Based Indices
- Nifty Next 50 - The Nifty Next 50 tracks the performance of the 50 companies from the Nifty 100 companies after excluding Nifty 50 companies. This index was introduced on 1st January 1997 with a base date of 3rd November 1996 and a base value of 1000.
- Nifty 100 - The Nifty 100 index is broader compared to the Nifty 50 and Nifty Next 50 because this index includes the Nifty 50 and Nifty Next 50. The Nifty 100 evaluates the performance of the top 100 companies based on the full market capitalisation.
Sectoral Indices
- Nifty Bank - Nifty Bank, often known as Bank Nifty, is a sectoral index that tracks the performance of the largest and most liquid bank stocks in India. It acts as the benchmark for the performance of the banking sector of our economy. Both private and state-owned banks are constituents of the Nifty Bank.
- Nifty Auto - Nifty Auto was launched on 12th July 2011, and it tracks the behaviour and performance of the automobile segment of the stock market. The Nifty Auto includes 15 NSE-listed companies that deal in 4-wheeler, 3-wheeler and 2-wheeler vehicles and ancillary parts. The base date of Bank Nifty is 1st January 2004.
Thematic Indices
- Nifty Commodities - Nifty commodities fall under the thematic indices sector because this index is constructed based on a specific theme: the commodities segment. The Nifty Commodities Index comprises 30 NSE-Listed companies that operate in the commodity segment. It was launched on 7th September 2011 with a base date of 1st January 2004.
- Nifty Energy - Similar to the Nifty Commodities index, the Nifty Energy index is also a thematic index that consists of 10 companies that deal in the petroleum, gas and power sectors. This index is used to track the performance of the energy sectors and was launched on 1st July 2005 with a base date of 1st January 2001.
Strategic Indices
- Nifty 100 Equal Weight - The Nifty 100 Equal Weight Index has the same constituents as the Nifty 100 Index. The difference is that the Nifty 100 Equal Weight Index gives equal and fixed weights to each company at each rebalancing. This index was launched on 10th June 2003 with the base date of 1st January 2003.
- Nifty 50 Arbitrage - Arbitrage strategy means buying equity shares and selling equivalent equity futures. Thus, the Nifty 50 Arbitrage Index evaluates and tracks the performance of such strategies in the market. It was introduced on 8th July 2016 with a base date of 1st April 2010.
How Is Nifty 50 Formed?
Since Nifty 50 works as a benchmark index for the stock market and the economy, it must be formed and maintained with deep research and statistical methodologies. To achieve the required preciseness and authenticity in the Nifty 50, a team of professionals working under the NSE Indices Limited (formerly known as India Index Services & Products Limited), which specialises in Indices formation and management, keeps the Nifty 50 index updated through a rebalancing process.
The value of the Nifty 50 index is derived by using a free-float weighted market capitalisation method. This method includes calculating the free float market value of all the shares that are available for public trading, which is further adjusted for a base period value. In the case of Nifty 50, the base market value is 2.06 trillion, and the base period is 3rd November 1995, with a base index value of 1000.
Formula for Index value = Free Float market value / (Base Market Capital * base index value)
In the calculation of the aggregate market value of the free float shares, only those shares that are available to the public for trading in the secondary market are included. These shares do not consist of shares held by the company management, executives, or shareholders.
- Nifty 50 is formed by using the free float weighted market capitalisation method.
- The base market value and base value of Nifty 50 is 2.06 trillion rupees and 1000, respectively.
- The base period of the Nifty 50 is 3rd November 1995, which also marks the start date of share trading on the NSE.
Criteria For Getting Listed On Nifty 50
The stocks listed on the National Stocks Exchange of India (NSE) are required to meet specific eligibility criteria to become a part of the Nifty 50 index. Primary eligibility criteria are:
- To become a part of the Nifty 50 index, a stock should demonstrate high liquidity so that it can be easily traded in the market.
- The trading frequency of a company should be 100% over the last six months.
- Companies issuing Divisional voting rights shares also qualify to be included in the index.
- The company should be listed on the National Stock Exchange and must have an Indian origin.
The Nifty 50 index is reconstituted on a semi-annual basis, so the companies that do not fulfil the eligibility criteria mentioned above can be removed from the index and replaced by new companies. This restructuring is essential to maintain transparency and real-time representation of the performance of the stock market.
Key Takeaways
- The Nifty 50 index is the flagship and benchmark index of the National Stock Exchange. NSE Indices Limited launched it on 21st April 1996 with a base date of 3rd November 1995.
- The Nifty 50 Index evaluates the behaviour of the top 50 companies that are listed on the National Stock Exchange (NSE). These 50 stocks are also known as the blue-chip companies, representing the best performing largecap companies of the Indian stock market.
- Investors can gauge the overall market sentiment by analysing the movement of the Nifty 50 index during a day or a particular time frame.
- The index value is calculated using the free float weight market capitalisation method.
- The Nifty 50 index is rebalanced semi-annually each year, and the stocks are added or removed from the index as per certain eligibility criteria.
FAQs
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