Nifty 50

What is the Nifty 50?

The Nifty 50 (INDEXNSE: NIFTY_50) is the flagship benchmark index of the National Stock Exchange (NSE) of India, representing the weighted average of 50 of the largest and most liquid Indian companies listed on the exchange. Launched in April 1996 with a base value of 1000 and a base year of 1995, the index covers 13 sectors of the Indian economy, including financial services, information technology, energy, and consumer goods, making it a diverse and comprehensive indicator of the Indian stock market’s overall health.

The index is widely used by investors, fund managers, and analysts to gauge the market’s performance and as a base for various investment products such as index funds, exchange-traded funds (ETFs), and derivatives. The Nifty 50 is maintained by NSE Indices Limited and is reviewed semi-annually to ensure it remains representative of the market’s leading companies. Its composition and performance serve as a barometer for the Indian economy, helping both domestic and international investors make informed decisions.

What is the stock selection process for the Nifty 50?

The selection of stocks for the Nifty 50 index follows a rigorous and transparent process managed by NSE Indices Limited.

• Only equity shares listed on the NSE are considered.
• Stocks must have high liquidity, which is measured by their average impact cost; only those with an impact cost of less than 0.50% over the past six months are eligible.
• Companies must be part of the Nifty 100 universe and have a minimum listing history of six months, except in cases of large recent IPOs that qualify based on market capitalisation.
• The index gives preference to companies with a high free-float market capitalisation, ensuring that only widely held and frequently traded shares are included.
• The index also aims to reflect the sectoral balance of the Indian economy.
• The Nifty 50 is reviewed and reconstituted semi-annually, with changes announced in advance to ensure transparency and provide time for investors like you to adjust their portfolios accordingly.

How is the Nifty 50 value calculated?

The Nifty 50 index value is calculated using the free-float market capitalisation-weighted method. This means the market capitalisation of each of the 50 constituent companies is determined by multiplying their share price by the number of shares readily available for trading (free float). The total free-float market cap of all 50 companies is then divided by a predetermined index divisor to arrive at the Nifty 50 value. This calculation methodology ensures that the index reflects only the market movements of shares that are actively traded.