Nifty
Stuid
The ‘National Stock Exchange’ and ‘fifty’ combine to form Nifty. To be precise, it is the abbreviation of the ‘National Stock Exchange Fifty’. A collection of top performing 50 equity stocks which are actively trading in the index. It is also known as ‘Nifty50’ or ‘CNX Nifty’.
Nifty is a well known stock index. It was introduced by the National Stock Exchange of India. Founded in 1992, the index started trading in 1994. Nifty is owned by IISL (India Index Service & Products Limited). The specialized Indian company focuses on an index as its focus product. IISL offers a variety of financial products including index funds, index futures and options, and stock futures and options.
The measurement of changes that take place in the stock market is called the stock index. It evaluates price movement and market performance. Inorder to create an index, it is important to identify stocks with similar characteristics. The grouping can be done on the basis of the type of industry, total market capitalization or the size of the company.
The values of the underlying group of stocks can be used to calculate the value of the stock market index. A change in the value of underlying stock will result in change in the stock index value. If the price of the stock rises, the index will rise and vice-versa.
An index highlights the changes in the market. It gives a broad picture regarding the overall market investing sentiment and price movements. It is mainly used by investors and financial managers for measuring the value of portfolio holding. Index is also used for comparing the performance with the benchmark index.
Standard indices in India
- NSE Nifty and BSE Sensex
- Broad-based index (Nifty 50, BSE 100, Nifty Next 50)
- Market capitalization indices (BSE Smallcap, Nifty Mid Cap etc)
- Sectoral indices (Nifty FMCG index, Nifty Bank index)
Sectors of the Indian economy covered by Nifty 50
Patterns and trends of blue-chip companies are followed by Nifty 50. They are the largest companies in the country with high liquidity. Based on different asset classes, sectors, or segments, Nifty has several sub-indices as well. This includes NIFTY IT, NIFTY Next 50, NIFTY Bank, NIFTY Small Cap etc. Around 1,600 companies are listed by Nifty.
It is a benchmark index by NSE. NIFTY50 is one of the two national indices. It is a broad based index of the NSE. We all know that NSE is the leading stock exchange in India. It is the biggest trading platform in the country. The other national index is Sensex, it is the product of the Bombay Stock Exchange.
Companies which are part of Nifty
For understanding the latest stock performance, the Nifty index reconstitution takes place every six months. It evaluates the 6-month performance of the stocks. It also verifies whether the companies fulfill the eligibility criteria. As per these criteria, stocks are eliminated or added in the stock list by Nifty accordingly. If there is any elimination or addition to be made, the particular company is given a notice of four weeks prior to the reconstitution.
A superb team of professionals manage the Nifty index. It is rather an advisory committee which offers guidance and expertise on issues related to equity indices.
Eligibility Criteria
- The Indian company should be registered with the National Stock Exchange.
- The company’s stock must be highly liquid. Liquidity is measured by using average impact cost.
- The given company’s trading frequency should be 100 percent over the last six months.
- It is important for the company to have a free-floating average market capitalization. It should be 1.5 times greater than the smallest company on the index.
- Company shares which have DVR (Differential Voting Rights) are also eligible for the Nifty 50 Index.
The index also changes with company events like spin-offs, mergers or acquisitions. Quarterly screening of the companies are conducted by Nifty to ensure they are adhering to regulations.
The companies should follow the mandates of SEBI as well. Otherwise, they might get delisted from the indices.
Milestones of Nifty
Here are the major milestones of Nifty 50.
- NSE was recognized as a stock exchange in 1993.
- In 1996, the Nifty 50 index was launched with a base value of 1000. It is the flagship index of the National Stock Exchange (NSE).
- The Nifty touched 1800 due to the IT-boom in 2000.
- In 2006, the series sector boom helped Nifty reach 3000.
- Nifty grew to 5000 in 2007.
- After the NDA government came to power at the center in 2014, Nifty touched 7000.
- Credit to the strong FII participation, in 2017, Nifty increased to 9,000.
- As a result of the GST roll out, good monsoon, and strong corporate earnings in 2017, Nifty increased to 10,000.
- Nifty touched the 11,000 mark in 2018. Thanks to the fall in crude oil prices and positive remarks from the World Bank on the Indian economy.
- Because of the Covid 19 vaccine rollout, Nifty touched the 15,000 mark in 2021.
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Check your knowledge
Answer) ISL (India Index Service & Products Limited).
Answer) The measurement of changes that take place in the stock market is called the stock index.
Answer) 1996.