What is Nifty? Nifty 50 Meaning and Calculation Explained

The Nifty 50, launched in 1996, is a key stock market index representing the top 50 companies listed on the National Stock Exchange (NSE). Covering diverse sectors like finance, IT, and energy, it accounts for about 65% of the total market capitalisation on the NSE. With a base value of 1,000, the Nifty 50 has become a critical gauge for India’s economic performance, offering investors a snapshot of the country’s market trends and growth potential. 

Top Companies Listed in NSE Nifty 50 Based on Market Cap

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The data on this Nifty index list is live and subject to real-time changes. The above list of top stocks in NSE Nifty 50 is derived from Tickertape Stock Screener.

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

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How to Invest in Nifty 50 Stocks via smallcase?

Did you know you can invest in NIFTY 50 stocks with smallcase managed by SEBI-registered investment professionals?

What is smallcase?

smallcase is an innovative investment platform that helps investors create a diversified portfolio of stocks or Exchange Traded Funds (ETFs) that reflect a specific theme or strategy. These smallcases are created and managed by SEBI-registered professionals.

Among 500+ smallcases, here is a collection of 11 smallcases called Nifty 50 portfolios. It consists of the smallcases that have Nifty 50 ETF as one of its underlying constituents.

Here are a few popular smallcases among new investors:

What is Nifty?

Nifty stands for National Stock Exchange Fifty, introduced by NSE on 21st April 1996. Nifty is the index of the National Stock Exchange of India and represents the performance of the top 50 companies. This Nifty 50 is based on its free-float market capitalisation, which helps investors understand its significance. 

What is an Index?

A stock market index tracks the performance of a specific group of stocks to reflect the overall movement of a market or sector. It acts as a benchmark, showing whether the market segment it represents is rising or falling. Indices can be based on factors like market capitalisation, industry, or stock exchange listings.

Examples include the Nifty 50, which tracks 50 large Nifty 50 companies on the NSE, and the Sensex, which covers 30 leading companies on the BSE. Investors and analysts use these indices to gauge market trends and compare the performance of individual stocks or portfolios against the broader market.

Eligibility Criteria for Companies to Get Listed on NIFTY 50

The Nifty 50 eligibility is as follows: 

• A company must be registered with the National Stock Exchange and be of Indian origin.
• The stock’s liquidity is crucial, determined by the impact cost, measuring the trading price relative to the index’s weight on the company’s market capitalisation. Over six months, the impact cost should be less than or equal to 0.50%, while 90% of observations are made on a portfolio of Rs. 10 cr.
• The company’s trading frequency should be 100% over the last six months, and its free-floating average market capitalisation must be 1.5 times greater than the smallest constituent in the index.
• Companies with Differential Voting Rights (DVR) shares are also eligible.

Note: National Stock Exchange Fifty undergoes reconstitution during significant events like spin-offs, mergers, acquisitions, suspensions, or compulsory delisting. Quarterly screenings ensure adherence to regulations. Compliance with Securities and Exchange Board of India (SEBI) mandates is imperative, as non-compliance may lead to delisting from the market indexes.

Types of NIFTY Indices

• NIFTY 50: It is the flagship India index of the National Stock Exchange (NSE). It represents the top Nifty 50 companies listed on the exchange, based on free-float market capitalisation.
• NIFTY Next 50: It comprises the next 50 companies after the NIFTY 50 and is also based on free-float market capitalisation.
• NIFTY 500: It is a broad-based type of the National Stock Exchange Fifty index that covers the top 500 companies listed on the NSE. It represents about 95% of the total market capitalisation.
• NIFTY Midcap 150: It represents the mid-sized companies listed on the NSE, based on free-float market capitalisation.
• NIFTY Smallcap 250: It comprises the small-sized companies listed on the NSE, based on free-float market capitalisation.
• NIFTY 100: It includes the 50 companies from the NIFTY 50 index, as well as an additional 50 companies.

Sectoral Indices

• NIFTY Bank: It represents the banking sector in India and comprises the top banking companies listed on the NSE. It is also known as Finnifty. 
• NIFTY IT: It represents the Information Technology sector in India and comprises the top IT companies listed on the NSE.
• NIFTY Metal: Nifty Metal consists of metal sector companies overlooking the mining and distribution functions related to metals found in India.
• NIFTY Auto: Nifty Auto is an index that showcases all the automotive, and automobile sector stocks along with ancillary manufacturers like vehicle components and tyres.
• NIFTY Realty: This index represents the real estate sector in India, including companies engaged in real estate development, construction, and property management
• NIFTY FMCG: This index tracks the performance of Fast Moving Consumer Goods (FMCG) companies in India.
• NIFTY Pharma: This index represents the pharmaceutical sector in India, including companies engaged in the development, manufacturing, and distribution of pharmaceutical products.
• NIFTY Energy: This index tracks the performance of energy companies in India, including those involved in the exploration, production, and distribution of energy resources.

Importance of Nifty

Benchmarking Tool for Portfolio Performance

Nifty is a benchmark share market index that represents the Nifty 50 performance of the companies listed on the National Stock Exchange of India. Investors can use it as a Nifty 50 benchmarking tool to evaluate their portfolio’s performance against the overall market. However, investors should also consider other factors and conduct fundamental and technical analysis before investing in any stock.

Tracking Market Trends and Sentiment

The Nifty index provides a way for investors to track the overall market trends and sentiment, including the performance of various sectors and industries. 

Investment Decision-Making Based on NIFTY Performance

Many investors use the Nifty as a tool for investment decision-making. By analysing Nifty’s performance, investors can get an idea of the overall market direction and make decisions accordingly. However, making decisions solely based on Nifty 50 performance may not be the best idea. Investors can consult a financial advisor and/or conduct more in-depth research before investing. 

Major Milestones in the Nifty 50 History

• 1993: NSE gains stock exchange recognition in the base year of NIFTY. 
• 1996: Launch of Nifty 50 index with a base value of 1000, becoming NSE’s flagship index.
• 2000: National Stock Exchange Fifty peaks at 1800 during the IT boom.
• 2006: National Stock Exchange Fifty soars to 3000 fueled by a service sector boom.
• 2007: National Stock Exchange Fifty achieves the 5000 milestone.
• 2014: National Stock Exchange Fifty hits 7,000 following the formation of NDA government.
• 2017: Strong FII participation propels National Stock Exchange Fifty to 9,000.
• 2017: National Stock Exchange Fifty reaches 10,000 with the GST rollout, favourable monsoon, and robust corporate earnings.
• 2018: National Stock Exchange Fifty touches 11,000 due to a drop in crude oil prices and a positive World Bank update on the Indian economy.
• 2021: Nifty attains the 15,000 mark with the rollout of COVID-19 vaccines.
• 2023: Nifty crossed 20,000 mark.
• 2024: The NIFTY 50 achieved a record high of 26,277.35 on September 27, 2024.

How is Nifty Calculated?

NIFTY is calculated using a free-float market capitalisation-weighted method. This means each stock’s weight in the index is based on its free-float market capitalisation, considering only shares available for public trading. It excludes shares held by promoters, government, employees, and other strategic partners.

The Nifty 50 calculation formula is listed below: 

Index Value: Current Market Value / (Base Market Capital * 100)

Where:

• Current Market Value is the weighted aggregate market capitalisation of all 50 companies in the index.
• Base Market Capitalisation is the weighted aggregate market capitalisation of all 50 companies as on the base date.

Benefits of Investing in Nifty 

Investing in NIFTY has several benefits, including:

• Diversification: Nifty consists of various indices based on market cap and sectors.  thus presenting an opportunity for an investor to diversify their investment portfolio. This helps reduce the overall risk of the portfolio.
• Liquidity: Nifty is highly liquid, meaning investors can easily buy or sell shares without impacting the price of the index.
• Transparency: Nifty is a transparent and well-regulated index, providing investors with complete information about the companies listed in the index.

Differences Between Nifty 50 vs Sensex

Factors to Consider While Investing in Nifty

• Fundamentals of the Company: This refers to the financial and non-financial aspects of the company. Such as its revenue, Nifty 50 returns, profit margins, debt-to-equity ratio, management quality, industry position, etc.
• Valuation: The price of a company’s stock should be reasonable compared to its earnings and growth potential. Investors should assess whether the stock is overvalued or undervalued.
• Market Trends: The stock market is influenced by various macroeconomic factors, such as interest rates, inflation, geopolitical events, etc. These factors can impact the performance of Nifty 50 investment stocks.
• Investment Horizon: The investment horizon refers to the length of time an investor plans to hold onto a particular stock. It is important to align one’s investment horizon with their investment goals and risk appetite.
• Cost: The cost of investing in the Nifty 50 components varies according to the brokerage platform. These platforms charge brokerage fees, taxes, mutual fund expenses, and other costs, which can significantly impact your investment.

To Wrap It Up…

​​In conclusion, the Nifty index can be an essential tool for investors looking to gain exposure to the Indian stock market. It comprises actively traded companies across various Nifty 50 sectors and provides diversification, liquidity, and transparency. However, it is imperative to do your own research and/or consult a financial advisor before investing.

Frequently Asked Questions on Nifty

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