What Is the Nifty 50 ? | Nifty

National Stock Exchange Fifty

Nifty is the market indicator of National Stock Exchange (NSE). NSE was established in 1992 located in Mumbai . The full form of NIFTY is “National Stock Exchange Fiftyit is a term made up of two words National + Fifty. Due to indexing 50 companies, it is also known as Nifty50 and CNX Nifty. It tells us about the movement in the stock price of the top 50 companies listed in NSE. It is also called Nifty50, but usually most people known as nifty. Nifty is a key benchmark of the National Stock Exchange of India. This is an index of 50 major company’s shares listed on the national stock exchange. It monitors the shares of 50 major companies that is listed in it.

Nifty, which is a stock market index and its most important job is to keep an eye on all the shares of listed companies in the stock market, and then give us an average value after the day’s work.

It also take into account the ups and downs in the 50 shares which are listed and also provides information about them. Nifty50 is the India’s most prominent and dominant stock index. Nifty is a stock index that is indexing stock of 50 major companies but right now there are 51 stocks and It is owned and managed by  India Index Services and Products Ltd. (IISL). Nifty has indexed 50 companies but right now there are 51 stocks of 12 different sectors companies.


There are two major stock exchange in India:-

(i) Bombay Stock exchange – BSE (Mumbai)

(ii) National Stock Exchange – NSE (Mumbai)

What is the function of Nifty ?

The main function of Nifty is to provide us information about the 50 listed companies share and market. through Nifty, we know the company which is listed in the stock market, how the company is working, if the company is doing a good performance in market then its direct impact is seen in the company’s shares and the prices of the company’s shares increase. And when the prices of a listed company goes up, then it also accelerates the Nifty due to this.

In the same way if the companies are not getting more profit or continuously lowering the profit, then its impact also directly affects the shares of that company and the prices of shares start decreasing. And when there is a decrease in the prices of shares, the decline in Nifty can be seen.

Difference between Nifty and Sensex

NIFTY and SENSEX are almost the same but there is some 
differences in Nifty and Sensex which is as follows :-

(i) Shares of 50 companies have been listed in the National Stock Exchange (NSE) but right now there are 51 stocks while shares of 30 companies in Sensex (BSE) have been listed.

(ii) Nifty is a part of National Stock Exchange (NSE), while Sensex is part of the Bombay Stock Exchange (BSE).

(iii) More than 1600 companies are listed in National Stock Exchange, while more than 5000 companies are listed in the Bombay Stock Exchange.

What is Market Capitalisation and Free-float market capitalisation

It is very important for you to know both terms:-

Market Capitalisation :- Market capitalisation is the price of a company, which is based on its stock prices. The higher the price of a company it is. With the total number of shares issued by that company, to calculate the market capitalisation of a company, multiplying one share of the company by the current price.

Market capitalisation =  Total no. of shares issued by a company x Market price of each share.

Free-float Market Capitalisation :- This is the open part of the stock of a company that is available for general public to buy and sell. It is also called open market share. These can be purchased from the stock market.

There are many investors in a company that are share holders of the company, such as those who start a company, called promoters, government, trust, FDI etc. but in the BSE-Sensex, the shares of any company are included which are open market shares, which can be purchased from the stock market. To find a company’s free-float market capitalisation, with the market capital of that company, multiply the free-float factor.

Free-float Market Capitalistion = market capitalisation of a company x free-float factor.

How NIFTY is calculated?

Nifty is calculated by using the “Free-float Market Capitalization” methodology just like sensex but there are some two differences. They are:-

* The base year is taken as 1995

* The base value is set to 1000

How Nifty calculated, lets understand with an example

Suppose the index has two companies A and B.

Company A - has 500 shares out of which 300 are free floating or available for general public to buy and sell. The price of each share is Rs 80/-.

Company B - has 1000 shares out of which 700 are free floating. The price of each share is Rs 100/-.

Market capitalisation of company A = (No. of shares X price of each share) = (500 X 80) = 40 000

Market capitalisation of company B = (No. of shares X price of each share) = (1000 X 100) = 1 00 000

Free float factor for company A

Free floating shares / total shares X 100 = 300/500 X 100 = 0.60

Free float factor for company B

Free floating shares / total shares X 100 = 700/1000 X 100 = 0.70

Total free float market Capital of the index = (market capital of company A X free float factor for company A) (40 000 X 0.60) = 24 000 + market capital of company B X free float factor for company B) (1 00 000 X 0.70) = 70 000

Let us assume the base year index was 1000

Value of index = Total free float market capital of the index X 100 / Base year index

94 000 X 100/1000 = 9400

So the value of the index is 9400

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