What is the Nifty 50 stock index?
The Nifty 50 is currently one of the two major stock indices in India. In fact, it is the benchmark stock index for the Indian stock market that is most frequently used by online brokers.
This index gives us a representation of a well-diversified weighted average of 50 of India's most profitable listed companies across 12 different industries.
The Nifty 50 stock index was created in April 1996 and is made up of various Nifty stock indices. The Nifty 50 is also an index owned and managed by India Index Services and Products or IISP.
In the past and from 2008 to 2012, the share of the 50 index in the overall market capitalisation of India has declined dramatically from 65% to 29%. This decline is mainly due to the rise in the share of other sectoral indices in the country.
How is the Nifty 50 index price calculated?
Before knowing how you can analyse the value of the Nifty 50 stock index, it is also important to understand how its price is calculated.
The Nifty 50 is a free float-adjusted stock index. Before 2009, the index was calculated using the full market capitalisation method.
When the Nifty 50 was created, its base value was set at 1000 points. Its base capital was then Rs. 2.06 trillion.
As far as the calculation of the price of a Nifty 50 is concerned, it is calculated using the free float market capitalisation method. Thus, the price level of the Nifty 50 index actually indicates the total market value of all the constituents in relation to the base value as of 3 November 1995, when it was first issued.
The formula applied to calculate the index value is therefore as follows:
Value of the Nifty 50 = current market value / base market capital x value of the base index (1,000 points)
What is the composition of the Indian Nifty 50 stock index?
Before you start speculating on the price movement of the Nifty 50 index, it is of course important to understand its composition. As you will have gathered, the index is made up of 50 stocks of companies listed on the Indian stock market, from among the largest capitalisations and from the 12 main sectors of activity in the country.
We will not list all 50 companies here, but here is an overview of the companies that have the greatest weight in the index:
- HDFC Bank Ltf in the financial and banking sector with a weight of 9.60%.
- Reliance Industries Ltd in the oil and gas sector with a weight of 7.77%.
- Housing Development Finance Corporation in the field of banking and financial services with a weight of 6.79%.
- ITC Ltd in the field of consumer goods with a weight of 5.55%.
- ICICI Bank in the field of banking and financial services with a weight of 5.01%.
- Infosys Ltd in the field of information technology with a weighting of 4.96
- Larsen & Toubro Ltd in the field of infrastructure with a weight of 3.91%.
- Kotak Mahindra bank in the field of banking and financial services with a weighting of 3.39
- Tata Consultancy Services in the field of information technology with a weighting of 3.33
- State Bank of India in the field of banking and financial services with a weight of 3.02%.
It is also interesting to know the distribution of the different Indian business services in the course of this index with :
- The financial services sector with 35.73%.
- The energy sector with 15.19%.
- The information technology sector with 11.20%.
- The automotive sector with 10.32%.
- The consumer goods sector with 9.17%.