We will be discussing the following topics in this Blog.
- What is Nifty?
- Types of Nifty?
- How are Companies selected for Nifty?
- How is it Calculated?
- Companies in the Nifty
What is Nifty?
You might have come across this word related to the Stock Market in some way. Now let us see what Nifty actually is, now when you need to know the movement or trend of the market as a whole, you cannot sit and see every companies trend or movement and understand.
Firstly, the simple parameter made for everyone to understand the whole movement of the market. So, It contains the top 50 Companies of National Stock Exchange (NSE)
Mainly, It is the indicator of the National Stock Exchange (NSE). But, It is known as Nifty 50. It gives us the movement of the economy. So, It was launched by the National Stock Exchange in the year 1996.
Firstly, The word Nifty comes from two words, that are national and fifty. So, It contains the 50 Stocks; thus, it is also called Nifty 50.
Types of Nifty
We have seen that it includes 50 Stocks of various sectors, but there are also sector wise indicators in it, which make an easy job to observe a specific sector rather than the total market. It has types according to the various types of sectors, let us discuss them
This index is made to know the Automobile Industry. So, It has the companies which deal with all types of vehicle manufacturers, vehicle parts manufacturers, tires manufacturers, etc. It contains 15 stocks. Nifty Auto is the name of this Index
The Index tracks the whole banking industry. So, It has the banking companies which have good liquidity and large market capitalization. It contains all the Private and PSU Sector banks. This index contains 12 Stocks. Nifty Bank is the name of this Index.
This is the new index. It is tracks the performance of the companies dealing with Consumer Durables. This index contains 15 Stocks. Nifty Consumer Durables is the name of this Index.
Firstly, The performance of the companies related to financial services can be seen in this Index. Here financial services mean all the institutions dealing with the financial activities such as Banks, Non-Banking Financial Institutions, Insurance Companies, Housing Finance Companies, and other financial services companies, this list contains 20 Stocks. Nifty Financial Services is the name of this Index.
This index tracks the performance of the companies which are into manufacturing of the Fast Moving Consumer Goods (FMCG). This index contains 15 Stocks. The name of this Index is Nifty FMCG
The companies having more than 50% of their turnover from the IT related products are added to this list. Companies such as IT Education, Software Training, Network Infrastructure are on this list. It is one of the most important indices besides Nifty 50. The name of this Index is Nifty IT.
The Companies which operate in the Media, Entertainment, Printing, and publishing sector include in this list. It shows the performance of these companies. Nifty Media is the name of this Index.
The Mining and Metal Companies are included in this Index. 15 Stocks are present in this Index and Nifty Metal is the name of this Index.
This index tracks the performance of the companies dealing with Pharmaceutical Products. Nifty Pharma is the name of this Index.
Besides the Nifty Bank Index which contains the mixture of all banks. But this index tracks the performance of the Private sector banks, this list contains 10 stocks. The name of the Index is Nifty Private Bank.
This index tracks the performance of the PSU banks. The name of this Index is Nifty PSU Bank.
This index was created to understand the performance of the companies which are into Real Estate. Nifty Realty is the name of this Index.
Also Read : What is Sensex?
How are Companies selected?
There is a criteria for a company to be included, they are: –
- The Company should be listed on the National Stock Exchange (NSE)
- The Companies market capitalization should be between large to mega capitalization
- The Liquidity of the Company should be relative on the Exchange
- The Revenue of the Company should be generated from its core operations.
- The Company should be maintaining the sector in line with the equity market.
- The Company should have its presence in the derivatives segment.
How is it Calculated?
It is Calculated by the method based on the free float market capitalization.
Let us see how it is calculated, the word free float means the shares of a company which are freely floating in the market means the shares of the company which are traded in the market, here the shares held by the promoters, officials, employees of the companies are excluded, in simple words the shares which are locked are not considered while calculating it.
For example, assume that the total number of shares of the HDFC bank is 100 and from the total number of shares let us assume 20 shares are held by the promoters, etc., and the remaining 80 shares are freely trading in the market, and also assume that the share price of HDFC bank is 10 per share, now the free-float market capitalization of HDFC bank comes to the number of freely traded shares X the current market price of a share that is 80×10= 80 is the free-float market capitalization of the HDFC bank.
Free Float Capitalization Method
In the same manner, the free float capitalization of the 50 companies is calculated and the total free float of the 50 companies is added and if the free-float market capitalization of the 50 companies goes up the Nifty goes up and if the free-float market capitalization of the 30 companies goes down the Nifty also goes down.
Companies in the Nifty
It is felt like an honor to be included in the Nifty list, here is the list of companies, there are 50 Companies in the Sensex now, they are: –
|Name of the Company|
|Tata Consultancy Services|
|Kotak Mahindra Bank|
|Larsen & Toubro|
|State Bank of India|
|Power Grid Corporation of India|
|Dr. Reddy’s Laboratories|
|Ultra Tech Cements|
|Mahindra & Mahindra|
|Bharat Petroleum Corporation Limited|
|Oil & Natural Gas Corporation|
|Indian Oil Corporation|
Also know : How the Stock Market works?
In simple words Nifty is the list of 50 top Stocks listed on the National Stock Exchange, it is helpful for an investor to track the market as a whole. It is the Index of National Stock Exchange
There are 12 types of Nifty.
There are 50 Companies in Nifty
The top Companies in Nifty are, HDF Bank, Reliance Industries, HDFC, Infosys, ICICI Bank
Also Read :- The best Stock Brokers in India