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Nifty 50: Things you didn’t know about the world’s most traded index contract

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We often hear news of the stock markets rising or falling and touching new highs or lows. If you are an investor, such news can have a significant impact on your fortunes. Have you ever wondered how the stock market fluctuations are measured? There are various companies listed on the market, and it is simply not possible to incorporate the value of all listed shares to determine stock market movements.

That is why we have market indices. Indices are constituted by companies that are most representative of the stock market. The companies are chosen based on factors such as market capitalization and the volume of trading. The most common indices in India are the Nifty and the Sensex.

Here’s everything you need to know about Nifty.

The NIFTY 50 is the flagship index on the National Stock Exchange of India Ltd. (NSE). The index tracks the behavior of a portfolio of blue-chip companies, the largest and most liquid Indian securities. It includes 50 of the approximately 1600 companies traded (listed & traded and not listed but permitted to trade) on NSE, captures approximately 65% of its float-adjusted market capitalization, and is a true reflection of the Indian stock market.

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The NIFTY 50 covers significant sectors of the Indian economy and offers investment managers exposure to the Indian market in one efficient portfolio. The index has been trading since April 1996 and is well suited for benchmarking, index funds and index-based derivatives.

The NIFTY 50 is owned and managed by NSE Indices Limited (formerly known as India Index Services & Products Limited-IISL), India’s first specialized company focused on an index as a core product.

The NIFTY 50 is a 50 stock, float-adjusted market-capitalization-weighted index for India. It is used for a variety of purposes, such as benchmarking fund portfolios, index-based derivatives, and index funds.

The NIFTY 50 is derived from economic research and is created for those interested in investing and trading in Indian equities.

Market Representation: The NIFTY 50 stocks represent about 65% of the total float-adjusted market capitalization of the National Stock Exchange (NSE).

Liquidity: Market impact cost is the best measure of the liquidity of a stock. It accurately reflects the costs faced when actually trading a

n index. For a stock to qualify for inclusion in the NIFTY 50, it has to reliably have market impact cost below 0.50 % when doing NIFTY 50 trades of Rupees (Rs) 10 crores.

 Trading in derivative contracts based on NIFTY 50:  The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with index futures on June 12, 2000. The futures contracts on the NSE are based on the NIFTY 50. The exchange introduced trading on index options based on the NIFTY 50 on June 4, 2001. Additionally, exchange-traded derivatives contracts linked to NIFTY 50 are traded at Singapore Exchange Ltd. (SGX).

How is Nifty different from Sensex?

As such, there is no main difference between Sensex and Nifty as both targets towards large-cap stocks. Both Nifty and Sensex are indices of the stock market that indicate the strength of the market. The Nifty reflects the value of the National Stock Exchange (NSE), whereas Sensex is the stock market index for the Bombay Stock Exchange (BSE).

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Nifty is broader as it consists of more listed securities i.e., 50 stocks, whereas Sensex contains 30 shares. Also, Nifty is considered to have a more diversified portfolio when compared to Sensex. More trading is noticed to happen in NSE when compared to BSE.

List of 50 Constituent Companies in Nifty:

Sr No Name of CompanySectorPrice (INR) of 1 share as on 6/4/2020
1Adani PortsInfrastructure360.40
2Asian PaintsConsumer Goods1695.65
3Axis BankFinance & Banking428.45
4Bajaj AutomobilesAutomobiles2932.40
5Bajaj FinanceFinance2931.50
6Bajaj FinservFinance6149.40
7Bharti AirtelTelecommunication581.45
8Bharti InfratelTelecommunication226.70
9Bharat Petroleum Co. LtdEnergy- Oil & Gas385.40
10Britannia IndustriesConsumer Goods3538.35
11CiplaPharmaceuticals638.80
12Coal IndiaEnergy & Mining135.25
13Dr. Reddy LaboratoriesPharmaceuticals3921.45
14Eicher MotorsAutomobiles18983.50
15GAILEnergy- Oil & Gas104.90
16Grasim IndustriesCement628.15
17HCL TechnologiesInformation Technology579.15
18HDFC LtdFinance1885.20
19HDFC BankFinance & Banking1073.95
20Hero Motocorp LtdAutomobiles2738.25
21Hindalco IndustriesMetals146.40
22Hindustan UnileverConsumer Goods2173.70
23ICICI BankFinance & Banking361.00
24IndusInd BankFinance & Banking487.20
25InfosysInformation Technology762.70
26Indian Oil Co. LtdEnergy- Oil & Gas87.85
27ITC Ltd.Consumer Goods207.55
28JSW SteelMetals190.95
29Kotak Mahindra BankFinance & Banking1353.80
30Larsen & ToubroConstruction944.25
31Mahindra & MahindraAutomobiles530.50
32Maruti SuzukiAutomobiles5932.10
33Nestle IndiaConsumer Goods16695.60
34NTPCEnergy- Power94.50
35Oil and Natural Gas Corp.Energy- Oil & Gas82.40
36Powergrid Corporation of IndiaEnergy- Power177.60
37Reliance Industries LimitedEnergy- Oil & Gas1787.90
38Shree CementCement22782.90
39State Bank of IndiaFinance & Banking184.70
40Sun PharmaceuticalsPharmaceuticals476.85
41Tata Consultancy ServicesInformation Technology2199.65
42Tata MotorsAutomobiles103.45
43Tata SteelMetals329.90
44Tech MahindraInformation Technology567.20
45Titan CompanyConsumer Goods1003.50
46Ultratech CementCement3889.60
47UPLChemicals444.20
48VedantaMetals106.45
49WiproInformation Technology224.80
50Zee Entertainment LimitedMedia172.25
Sectoral Indices
  • Nifty Auto Index

Nifty Auto Index comprises of 15 stocks. Furthermore, these 15 stocks of companies are in the business of manufacturing cars & motorcycles, heavy vehicles, auto ancillaries, tyres, etc.  This index reflects the performance of the automobile sector.

  • Nifty Bank

Nifty Bank comprises of India’s large capitalized banking stocks. This index has 12 stock from the banking sector. It captures the performance of the banking sector of the country.

  • Nifty Financial Service Index

Nifty Financial Service Index reflects the performance of banks, financial institutions, including housing, and other companies that provide financial services. This index comprises of 15 companies that are part of NSE.

  • Nifty FMCG Index

This index comprises of fast-moving consumer goods companies. Furthermore, this index has 15 stocks that are listed on NSE. These companies produce goods that are of mass consumption and non-durable.

  • Nifty IT Index

THE nifty IT index reflects the performance of the Indian IT sector. The index includes companies that have more than 50% of their turnover from IT-related activities like IT Infrastructure, Telecommunication Services, and Networking Infrastructure, IT Education and Software Training, Software Development, Hardware Manufacturer’s, Vending, Support, and Maintenance. The index currently has 10 companies listed on the NSE.

  • Nifty Media

This index captures the performance of the media and entertainment sector of the economy.

  • Nifty Metal Index

The nifty metal index comprises of 15 stocks listed on the NSE. Also, this index reflects the performance of the metal index.

  • Nifty Pharma Index

This index captures the performance of the pharma sector of the country.

  • Nifty Private Bank Index

This index comprises of 10 private banking stocks listed on NSE. Furthermore, it measures the performance of private banks in the country.

  • Nifty PSU Bank Index

This index reflects the growth and performance of public sector banks in the country.

  • Nifty Realty Index

Nifty realty index comprises of growth and performance of the real estate and infrastructure companies of the country.

  • Nifty 500 Industry Indices Index

IISL maintains different industry groups under the Nifty 500 Industry Indices Index.

Importance:

Concerning NIFTY, we can say that:

  1. If Nifty goes up, this means that the stock price of most of the major stocks on NSE has gone up.
  2. On the other hand, if nifty goes down, this tells you that the stock price of most of the major stocks on NSE has gone down.

The same is true in the case of Sensex. Moreover, when Sensex/Nifty goes high, it shows the economic growth of the country. Else if it keeps declining, it might mean a slow-down or depression.

For example, during the Indian recession of 2008-09, the Sensex fell over 12000 points (-60%). The fall in the Sensex was analogous to the recession. Meaning, people were selling their shares and an economic crisis in the country.

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