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Nifty is a very common term of share market. Index of NSE (National stock exchange) is known as Nifty. It comprises of 50 shares or stocks or corporations thats why it is sometimes known as Nifty 50. Nifty is an indicator of all major companies of NSE. NSE is situated at Delhi. Nifty 50 is used for a variety of purposes such as index funds, index based derivatives and benchmarking fund portfolios. It is professionally maintained for derivative tradings. It is an index accounting for total of 21 sectors of the economy. Nifty 50 has got good reputation in the bull markets of 1970s. It is officially known as S&P CNX Nifty. Full form of S&P CNX Nifty is Standard & Poor’s CRISIL NSE Index 50. Nifty 50 stocks were credited by the Bull Market. Nifty is basically based on top 50 companies profit. Nifty 50 is based upon solid economic research.
Future contracts on National Stock Exchange of India are based on S&P CNX Nifty. From June 26, 2009, Nifty 50 is computed on the terminology called “Free-Float Terminology”. The free-float methodology is the more correct way to compute both the index as well as the weight of individual stocks in the index. Today Nifty is owned and operated by IISL. IISL is a global phenomenon where company calculates and maintains the index. IISL is being launched by joined venture of NSE and CRISIL to focus on Management of Index. IISL stands for India Index Services and Products Limited. IISl is India’s First specialized Company which focuses on INDEX as a core product. Nifty is created for those who are interested in trading and investing in Indian Equities.
Considerations to be undertaken while working on Nifty50:
Nifty 50 is based upon solid economic research. There are millions and trillions of calculations were expended to evolve the rules inside Nifty.
- Correct size to use is 50.
- Stocks Considered for Nifty50 must be liquid by the ‘impact cost’ criteria.
- Largest 50 stocks that meet the criteria goes into the Index.
Characteristics:
- Solid Earning Growth.
- Low P/E Ratio.
- Extremely Stable, Even for long duration of time.
Constituents of Nifty:
Companies included in Nifty50 are: ABB Ltd., ACC Ltd., Ambuja Cements Ltd., Axis bank Ltd., Bharat Heavy Electricals Ltd., Bharat Petroleum corporation Ltd., Bharti Airtel Ltd., Cairn India Ltd., Cipla Ltd., DLF Ltd., GAIL Ltd., Grasim Industries Ltd., HCL Technologies Ltd., HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco Industries ltd., Hindustan Unilever Ltd., Housing Development finance corporation Ltd., ITC Ltd., ICICI Bank Ltd., Idea Cellular Ltd., Infosys Technologies Ltd., Jindal steel & Power Ltd., Larsen and Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., National Aluminium Co. Ltd., Oil & Natural gas Co. Ltd., Power Grid Corporation Of India Ltd., Punjab National Bank, Ranbaxy Laboratories, Reliance Capital Ltd., Reliance Communcations Ltd., Reliance Industries Ltd., Reliance Infrastructure Ltd., Reliance Power Ltd., Siemens Ltd., SBI, Steel Authority Of India Ltd., Sterlite Industries, Sun Pharmaceutical Industries Ltd., Suzlon Energy Ltd., Tata Communications, Tata Consultancy Services, Tata Motors Ltd., Tata power Co. Ltd., Tata Steel Ltd., Unitech Ltd., Wipro Ltd.
Nifty 50 represents about 60% of the total Market capitalization of NSE. It is basically a diversified Index. It reflects overall market conditions accurately. Basic risk of Nifty 50 will be lower as compared to other Index portfolios.
Selection of Index set is based on following 3 criterias:
- Floating Stock.
- Market Capitalization.
- Impact Cost.
Impact Cost is the cost of executing a transaction in a security in proportion to the weight of its market capitalization. The Companies should be domiciled in India and must be trading on NSE. Sometimes stocks may also be deleted due to spin-offs. Index is maintained by rebalancing frequency, by monitoring Corporate Actions, by share updates as well. For Nifty all the currency should be in Indian Rupees.
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