What is Nifty50?
Nifty50 is something that every investor, stock market broker, or anyone looking into the stock market in India will know. It is a stock market index — that is, the National Stock Exchange’s official benchmark index, introduced in 1996. The word Nifty comes from compiling two words, National and Fifty, representing the NSE and the 50 actively traded stocks that makeup Nifty.
Nifty50 comprises India’s 50 most popular, consistent, and high P/E ratio – cap stocks for 13 different sectors of the economy, including technology, I.T., Infrastructure, consumer goods, Pharmaceuticals, Oil, Materials, and so on.
For us to understand Nifty share prices better, we must look into what the types of markets are and what the NSE is.
The types of Markets
There are two forms of markets in the finance world – the primary and secondary markets. The primary market is where companies or organizations sell their product or service to the general public for the first time. IPOs are a good example.
The secondary market is also called the stock market and is where investors and buyers trade stocks and shares amongst themselves without any involvement from the company.
India has two main stock exchanges, National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), with the official index being Nifty50 and Sensex, respectively.
The National Stock Exchange started in 1992 and 1994. The exchange started its trades with wholesale debt and cash markets. NSE is ranked 4th in the world by equity trading volume due to its technology-driven, sophisticated exchange.
Nifty is owned and managed by the Indian Index Services and Products or IISL, a subsidiary of the National Stock Exchange Strategic Investment Corporation Ltd. The index is a special one and is used for benchmarking portfolios, index or derivative funds, and so on. The economy hugely reflects on how Nifty share prices are doing in the stock market, as it is influenced by India’s top 50 richest and most successful trades.
How are Nifty stock value and index calculated
Initially, the index was calculated on the Full market capitalization method, but presently, it uses a better way called the Free-float market capitalization method. Nifty50 represents more than 50% of all free-float market cap of the stocks listed.
Market Capitalization is calculated by multiplying shares outstanding to the price, then Free float market capitalization is calculated by multiplying shares, price, and IWF or investable weight factor together. The index value is finally calculated by dividing present-day market value with Base market capital multiplied by base Index value – 1000.
Nifty 50 share price
Nifty 50 is clear to most of us. We know what it is, how it’s calculated, and so on. But one only learns all these for one reason – to trade. A derivative contract, the price which derives value from underlying assets, is the principle to follow with Nifty50. The underlying asset
In Nifty50, it is the Index itself. Hence the Nifty Future contract derives value from the Nifty Index Spot level.
If Nifty Index spot prices and values fluctuate, the future prices will also fluctuate; meaning it is directly proportional to the Index Spot Value.
The Nifty50 futures is one of the most popular and liquid future contract instruments in the country, with the size presented being 7.5. Contracts for Nifty are available in three different expiry plans.
If you want to actively trade and invest in stocks, a very keen knowledge of the stock market and analysis of stocks are required to make sure you don’t end up committing to a spree of bad investments. This is why you must always opt for consulting professionals equipped with software and experts to tell you exactly when to invest in what stock. Contact the experts now to help you in your stock market venture!