What is Nifty? Nifty Meaning Explained for Beginners

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what is nifty?

What is Nifty? Nifty is a benchmark index which was introduced by NSE, i.e., National Stock Exchange of India. It is an index of first 50 major Companies listed on the National Stock Exchange. It is also Known As Nifty 50.

Nifty50 is India’s most prominent and dominant Stock Index in India. This is the highest trend in the country. The second is the BSE Sensex.

How does Nifty work?

It monitors the shares of 50 major companies of the country. Through this, we get information about the performance of the top 50 major companies listed on NSE.

The Nifty index goes up when prices of stock of top 50 companies on NSE goes up, and it goes down when the latter goes down.

What is Nifty50 and How it is made?

The Nifty 50 is a diversified 50 stocks index accounting from 13 different sectors of the economy. In the Nifty where only 50 companies are listed, around 6000 companies are listed on the NSE.

Most of the listed companies in the Nifty are bought or sold. These 50 companies listed in the Nifty are selected from 13 different sectors. These companies are the largest companies in their sectors, and their market capitalization is around 60% of the entire market.

Nifty 50 companies are selected by the “index committee” of the stock exchange, and this committee consists of people from many sections, which can include prominent, mutual fund managersfinance journalists, government, banks,  economists, etc.

Nifty starts going up when people start buying more shares, and it goes down when people start selling.

How Nifty 50 is Calculated?

how is nifty calculated

The “Nifty 50″ is calculated taking into consideration share prices of 50 different companies listed on NSE.

First of All, We need to Understand about Market Capitalization and Free-Float Market Capitalization in Nifty 50

Market Capitalization is calculated by multiplying the price of its shares to the total no of shares issued by the Company.

Free-float Market Capitalization is calculated by multiplying the equity price of the share to the total no of shares available for trading excluding government holding, government holding, promoter’s holding, strategic holding, and other locked-in shares.

Note: Suppose company A has 10,000 shares in total, of which 4000 are held by the promoters so that only 6000 shares are available for trading to the general public. These 6000 shares are the so-called ‘free-floating‘ shares. If the price of each share is 100 rupees, then the ‘totalmarket capitalization of the company is 100,0000 rupees (1,00 x 10000), but its free-float market capitalization is 60,0000 rupees (6000 x 100).

 

The formula for Calculating For the Nifty 50 Index

(the sum of Free-float Market Capitalization of top 50 NSE Companies * Index Factor)

Where in  Index Factor=1000/market capital in 1995

Where 1000 is the base index value in 1995

For example, if the days’ Market Capitalization based on the performance of the 50 stocks is 6060000 and the base index of 1995  is Rs 5000. The index divisor becomes 1000/5000 and the Nifty 50 index value equals 6060000 x 1000/5000 = 121200 for that day.

Importance of Nifty50 index

There are so many advantages to Nifty, but some of the significant benefits that you need to know in your information are as follows:

  1. From Nifty we can know at a glance how NSE is performing.
  2. Easily get information about moving in the market or in the market for faster and slowdown.
  3. If the Nifty goes down, then the market is also going down. The precise estimation of market movements can be leveraged through the Nifty.
  4. Through Nifty, we get information about the economy of the country easily. We get to know if the market is swift and Nifty is going upwards. It means that the country’s economy is also going upwards.

Nifty 50 Stock Weightage

This part divided into three parts i.e

  • Based on Sectors representation.
  • Nifty 50 top 10 Companies.
  • Companies Under Nifty 50.

 

Nifty 50 based on Sectors representation

nifty50-sector-representation

Nifty 50 based on top 10 Companies

nifty50-top10-companies

Nifty 50 Companies List  (Updated May 2019)

Industry Company Name Weightage (%)
Automobile Bajaj Auto 0.86
Hero MotoCorp 0.69
Eicher Motors 0.6
Mahindra & Mahindra 1.27
Maruti Suzuki India 1.87
Tata Motors 0.82
Financial Services Axis Bank 3.16
HDFC Bank 10.53
ICICI Bank 5.55
IndusInd Bank 1.74
Kotak Mahindra Bank 3.91
State Bank of India 2.45
Yes Bank 0.66
Bajaj Finance 1.55
Bajaj Finserv 0.96
HDFC 6.95
Indiabulls Housing Finance 0.49
Cement Grasim Industries 0.75
UltraTech Cement 1.02
Cigarettes ITC 5.46
Information Technology HCL Technologies 1.36
Infosys 6.03
Tata Consultancy Services 5.01
Tech Mahindra 1.11
Wipro 0.95
Consumer Goods Hindustan Unilever 2.65
Britannia Industries 0.72
Titan Company 1.02
Asian Paints 1.39
Engineering Larsen & Toubro 3.51
Metals & Mining Coal India 0.89
Vedanta 0.64
JSW Steel 0.66
Hindalco Industries 0.64
Tata Steel 0.89
Energy ONGC 1.08
NTPC 1.15
Power Grid Corporation of India 0.91
BPCL 0.63
Indian Oil Corporation 0.79
Reliance Industries 10.07
GAIL (India) 0.68
Fertilizer UPL 0.75
Pharma Cipla 0.61
Dr. Reddy’s Laboratories 0.75
Sun Pharmaceutical Industries 1.07
Shipping Adani Ports 0.65
Media & Entertainment Zee Entertainment Enterprises 0.51
Telecom Bharti Infratel 0.47
Bharti Airtel 1.15

Conclusion

Nifty50 represents our Economy power. Sometimes it goes up more rapidly due to some positive news in the market, and people start buying more stocks, or it goes down when people start selling in huge amount.

That’s all. I hope this post ‘What is Nifty? Nifty Meaning Explained for Beginners?‘ is helpful to the readers.