What is Nifty? Meaning & Calculation [Beginners Take Notes]

Nifty Meaning - How Nifty Works?

You might have heard the word Nifty, if not more at least once in your lifetime. But what does Nifty actually mean? How does it work? Why do people talk about Nifty synonymously with the Stock Market?

Let’s Find Out!

Content:

Nifty Meaning

The full form of Nifty is National Fifty; it is the benchmark index of NSE (National Stock Exchange). Nifty was established in 1996 with the name CNX Nifty. Further, in 2015, it was renamed as Nifty 50. Nifty tracks the 50 largest and most liquid stocks out of more than 1,600 stocks listed on NSE. These 50 largest companies are from different industrial sectors and collectively represent the Stock Market and Economic Trends of India.

Nifty is maintained by India Index Services & Products Limited (IISL) which is a joint venture of the National Stock Exchange and CRISIL.

Nifty Timings

Nifty follows the timings of Equity Segment that is from 9:15 am to 3:30 pm, Monday to Friday.

How Nifty works?

As explained above, Nifty consists of the Top 50 largest companies, whenever these 50 stocks move, nifty moves proportional to these stocks.

Check out the list of Nifty 50 stocks below:

Sl No.Company NameSector
1Axis Bank Ltd.FINANCIAL SERVICES

 

35.52%

2Bajaj Finance Ltd.
3Bajaj Finserv Ltd.
4HDFC Bank Ltd.
5HDFC Life Insurance Company Ltd.
6Housing Development Finance Corporation Ltd.
7ICICI Bank Ltd.
8IndusInd Bank Ltd.
9Kotak Mahindra Bank Ltd.
10SBI Life Insurance Company Ltd.
11State Bank of India
12HCL Technologies Ltd.IT

 

17.16%

13Infosys Ltd.
14Tata Consultancy Services Ltd.
15Tech Mahindra Ltd.
16Wipro Ltd.
17Bharat Petroleum Corporation Ltd.OIL & GAS

 

14.99%

18GAIL (India) Ltd.
19Indian Oil Corporation Ltd.
20Oil & Natural Gas Corporation Ltd.
21Reliance Industries Ltd.
22Asian Paints Ltd.CONSUMER GOODS

 

11.56%

23Britannia Industries Ltd.
24Hindustan Unilever Ltd.
25ITC Ltd.
26Nestle India Ltd.
27Titan Company Ltd.
28Bajaj Auto Ltd.AUTOMOBILE

 

5.50%

29Eicher Motors Ltd.
30Hero MotoCorp Ltd.
31Mahindra & Mahindra Ltd.
32Maruti Suzuki India Ltd.
33Tata Motors Ltd.
34Cipla Ltd.PHARMA

 

3.75%

35Divi’s Laboratories Ltd.
36Dr. Reddy’s Laboratories Ltd.
37Sun Pharmaceutical Industries Ltd.
38Larsen & Toubro Ltd.CONSTRUCTION

 

2.26%

39Grasim Industries Ltd.CEMENT & CEMENT PRODUCTS

 

2.24%

40Shree Cement Ltd.
41UltraTech Cement Ltd.
42Coal India Ltd.METALS

 

2.20%

43Hindalco Industries Ltd.
44JSW Steel Ltd.
45Tata Steel Ltd.
46Bharti Airtel Ltd.TELECOM

 

2.08%

47NTPC Ltd.POWER

 

1.72%

48Power Grid Corporation of India Ltd.
49Adani Ports and Special Economic Zone Ltd.SERVICES

 

0.52%

50UPL Ltd.FERTILISERS & PESTICIDES

 

0.50%

We learned about the top companies and sectors that contribute to the movement of Nifty, but why only these companies are included in Nifty? How are the 50 companies in Nifty picked? Let’s find out!

How is Nifty Constituted?

For the company/stock to be included in Nifty 50:

  • The company should have a permanent office in India and should be listed and traded on the National Stock Exchange (NSE).
  • The company should be included in the Nifty 100 index and also should be available for trading in NSE’s futures and options segment to be included in the Nifty 50 Index.
  • The average free-floating market capitalization of the company should be 1.5 times higher than the smallest company in the index.
  • In the last six months the stock should be traded daily (100% trading frequency).

There are various other factors that are considered before including a stock in the Nifty. Check out the details here.

How is Nifty Calculated?

Nifty is calculated using the float-adjusted, market capitalization-weighted methodology. The index reflects total market value of all the stocks in the index relative to a particular base period. The base value of the Nifty is 1000 and the base market capital is ₹ 2.06 trillion.

Index value = Current Market Value / (Base Market Capital x 1000)

Note* The base year of Nifty is 1995.

As you have already learned about the Nifty meaning, that it consists of the largest companies from different industrial sectors that collectively represent the Economic Trends of India. Similarly, there are Sectoral Indices that track the performance of stocks of a particular sector.

How to invest in Nifty Index?

You can invest in the Nifty via Index Mutual Funds and Exchange Traded Funds (ETFs). These funds invest in a basket of stocks that mirror the returns of the index like Nifty or Sensex etc. The main difference between Mutual Funds and ETFs is, the prices of ETFs are updated actively during the day similar to stocks and can be bought and sold at live prices.

On the other hand, the prices of Mutual Funds are updated only at the end of the day and can be bought and sold based on the End of the Day Price.

You can also trade in Nifty via Futures and Options.

Sectoral Indices

Some of the Sectoral Indices are listed below:

  • Nifty Auto Index: This index represents the overall behavior and performance of the Automobiles Sector in India. Top Automobile Stocks included in the index:
    • BHARAT FORGE LIMITED
    • EXIDE INDUSTRIES LIMITED
    • BAJAJ AUTO LIMITED
    • MRF LIMITED
  • Nifty Bank Index: This index represents the overall behavior and performance of the Banking Sector in India. Top Banking Stocks included in the index:
    • ICICI BANK
    • AXIS BANK
    • HDFC BANK
    • STATE BANK OF INDIA
  • Nifty Media Index: This index represents the overall behavior and performance of the Media & Entertainment Sector in India. Top Media & Entertainment Stocks included in the index:
    • PVR LIMITED
    • INOX LEISURE LIMITED
    • ZEE ENTERTAINMENT ENTERPRISES LIMITED
    • SUN TV NETWORK LIMITED
  • Nifty IT Index: This index represents the overall behavior and performance of the Information Technology Sector in India. Top Information Technology Stocks included in the index:
    • TATA CONSULTANCY SERVICES LIMITED
    • INFOSYS LIMITED
    • INFO EDGE (INDIA) LIMITED
    • TECH MAHINDRA LIMITED
  • Nifty Pharma Index: This index represents the overall behavior and performance of the Pharmaceutical Sector in India. Top Pharmaceutical Stocks included in the index:
    • DR. REDDY’S LABORATORIES LIMITED
    • DIVI’S LABORATORIES LIMITED
    • CIPLA LIMITED
    • ALKEM LABORATORIES LIMITED

Indian markets and the economy as a whole are also measured using another index Sensex. It is the oldest index of India. Nifty and Sensex sound a lot synonymous to each other but are quite different. Check out the difference between Nifty and Sensex.

Nifty History

Over the years Nifty has had a roller coaster ride, below are some of the Top Single-Day Gains and Losses of Nifty:

Top Nifty Losses:

DateFallProbable Reason
28 October 19978.01%Asian Financial Crisis. Markets also crashed in Thailand, Indonesia, South Korea, and the Philippines.
21 January 200810%US Subprime mortgage crisis.
24 August 20155.92% (490.95 points)Chinese Stock market meltdown.
12 March 2020868.25 points (8.30%)Fall after the WHO declared COVID-19 a pandemic.
23 March 20201135.20 points (12.98%)Driven by the COVID-19 pandemic.

Top Nifty Gains:

DateHighProbable Reason
20 May 20193.69%Exit Polls of 2019 General elections predict a clear majority for the BJP government.
23 May 20192.49%2019 General Elections Results where BJP led NDA alliance won.
20 September 20196.12% ( 655.45 points)Announcement of a cut in the corporate tax rate for domestic companies and new domestic manufacturing companies.
23 September 20193.73% (420.65 points )Corporate tax rate cut in India.
7 April 20208.76% (708.40 points)Positive news that Covid infection numbers were peaking in some of the worst affected areas around the world.

Quick Summary

  • Nifty is the benchmark index of NSE (National Stock Exchange). Nifty tracks the 50 largest and most liquid stocks listed on NSE.
  • Nifty timings: 9:15 am to 3:30 pm Monday to Friday.
  • Nifty consists of the top 50 largest companies, whenever the stocks of these 50 companies move, nifty moves proportionally to the weightage of each stock.
  • Nifty is calculated using the float-adjusted, market capitalization-weighted methodology.
  • You can invest in nifty through mutual funds and ETF’s.
  • Nifty also has various indices that specifically track different sectors.

FAQ

1. How many companies are listed in Nifty?

NIFTY tracks the 50 largest and most liquid stocks out of more than 1,600 stocks listed on NSE.

2. How to check Nifty PE?

You can check the Nifty PE here.

3. How to invest in the Nifty Index?

You can invest in the Nifty Index via:

  • Mutual Funds
  • Exchange-Traded Funds &
  • Nifty Futures and Options.

4. How to trade in Nifty Intraday?

You can trade in Nifty Intraday via Futures and Options.

5. How to trade Nifty Futures?

You can start trading Nifty Futures by opening a trading and Demat account with Alice blue.

6. How to trade Nifty Options?

You can start trading Nifty Options by opening a trading and Demat account with Alice blue.

7. Is Nifty open today?

You can access Nifty from Monday to Friday between 9:15 am to 3:30 pm. Check out the list of market holidays here.

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About Author

Vinayak Hagargi

Vinayak is Impressively Enthusiastic about Financial Markets, Research & Curating Layman-Friendly Content. He has been Successfully Contributing to the Financial Markets for over 2 years & has written over 100+ articles. He aims to continue sharing his knowledge to empower newbies with Relatable, & Easy to Understand Content.

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