The National Stock Exchange unveiled the Nifty market index on April 21, 1996, by combining the words "National Stock Exchange" and "Fifty."The flagship index of the NSE, Nifty 50, is benchmark-based and displays the top 50 equity equities traded on the stock market among an aggregate of 1600 stocks. Jump into this article to discover more about NSE Nifty 50.
Nifty Stock Categories
Alongside SENSEX, Nifty is the other national indices in India, operated by IISL (India Index Services and Products). The top Nifty stock categories in the share market include:
1.Financial services
2.Information technology
3.Telecommunications
4.Pharmaceuticals
5.Automobiles
6.Entertainment and media
7.Fertilizers and pesticides
8.Energy
Eligibility Criteria for the NSE Nifty Index
The eligibility criteria to fulfill to qualify under the NSE Nifty index include the following:
1.The company must have domiciliary status in India and be registered under NSE.
2.Stocks must have high liquidity calculated according to average impact cost to be a part of the Nifty market. The cost of trading one security concerning the weight of the index, as determined by the market capitalization of the company, is known as the impact cost. The company's effect cost ought to be less than or equivalent to 0.50% or lower for six months, with 90% of sightings and analyses conducted on a portfolio valued at more than Rs 10 crores.
3.The company needs to possess a trading frequency of 100% in the past six months.
4.The company should display a free-floating average market capitalization. But the market capitalization has to be at least 1.5 times bigger than the smallest firm on the index.
5.Companies with DVR shares can also become a part of the Nifty market.
Reconstitution of the Nifty Listing
The Nifty stock market list is reconstituted every six months by observing the latest trends. In addition to the six-month reconstitution process that Nifty follows, the index undergoes reconstitution in the event of a company's spin-off, suspension, mandatory delisting, merger, or acquisition.
Furthermore, Nifty screens all of its companies every quarter to make sure they are following the rules for ETFs and Index Funds in the portfolio. Companies who do not comply with the latest directives issued by SEBI risk having their listings removed from indices such as the Nifty.
Also Read: 5 Tips to Invest in the Equity Market
Calculating the Value of the Nifty Index
Now that you know a little about the index, it's time to understand how to calculate the value of the Nifty index. The market capitalization and float-adjusted methods are used to calculate the value of the Nifty 50 indices. In this scenario, the level index is indicative of the aggregate market value of the stocks available in it for a particular period.
The specific base period for the Nifty index is November 3, 1995. Meanwhile, the base value of stocks always remains 1000 with a base revenue of Rs 2.06 trillion. So, the specific formula for determining the Nifty index value goes as follows:
Market capitalization= Price * Equity Capital
Free Float Market Capitalization = Equity Capital * Price * Investable Weight Factor
Index value = Current market value / (1000 * Base market capital)
The IWF focuses on figuring out the number of available shares for trading. Since the value of stocks keeps fluctuating daily, index calculation is always done in real-time.
The formula computes the modifications in corporate practices alongside their value. For example, rights issues, stock splits, and other things can result in corporate changes.
The Nifty share market serves as a standard by which all other Indian equity share markets are measured. It performs routine maintenance checks on the index. As a result, this guarantees that it is reliable and efficient. This may continue to be used as the Indian stock market benchmark index.
Factors Affecting the Nifty Market
The Nifty high low today can be influenced by a great deal of factors. For instance, global recessions can drastically change the performance of Nifty. Moreover, inflation trends can negatively affect the price of Nifty because of high borrowing costs for companies.
With high borrowing costs, companies' expansion initiatives are affected. Additionally, higher inflation can reduce discretionary spending along with the customers available for the company's offerings. Therefore, this reduced demand can impact the overall performance of the Nifty index.
Wrapping up
If you want to invest in NSE Nifty, you cannot directly buy it. Instead, you will have to purchase index funds and ETFs in the same proportion. With a consistent base value, the Nifty index promises high returns to investors. So, think about investing in it today and enjoy great market returns.
