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

The full form of Nifty is National Fifty; it is the benchmark index of the NSE (National Stock Exchange). Nifty was established in 1996 with the name CNX Nifty. Further, in 2015, it was renamed Nifty 50.

Content:

• Nifty Meaning
• Nifty Timings
• How does Nifty work?
• How is Nifty Constituted? what the stock should have achieved to be in nifty?
• How is Nifty calculated?
• How to Invest in Nifty?
• Other Nifty Indices
• Nifty History
• Quick Summary
• FAQ.

Nifty Meaning

The full form of Nifty is National Fifty; it is the benchmark index of the NSE (National Stock Exchange). Nifty was established in 1996 with the name CNX Nifty. Further, in 2015, it was renamed Nifty 50. Nifty tracks the 50 largest and most liquid stocks out of more than 1,600 stocks listed on the 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 the Equity Segment, which is from 9:15 am to 3:30 pm, Monday to Friday. 

How does 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:

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 the 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, 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 in 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.

Learn about Futures and Options here! 

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 in India. Nifty and Sensex sound a lot synonymous with 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:

Top Nifty Gains:

We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:

Quick Summary

• Nifty is the benchmark index of the 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 ETFs.
• 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 the NSE. 

2. How to check Nifty PE?

You can check the Nifty PE here.

3. How to invest in the Nifty 50?

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 Aliceblue.

6. How to trade Nifty Options?

You can start trading Nifty Options by opening a trading and demat account with Aliceblue.

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.