NIFTY 50 Full Form - National Stock Exchange 50
Updated on 11 March, 2024
upGrad Abroad Team
upGrad abroad Editorial Team
)What is Nifty 50? The full form of Nifty 50 is National Stock Exchange 50. The National Stock Exchange introduced the NIFTY market index. On April 21, 1996, the National Stock Exchange (NSE) combined 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 exchange out of a total of 1600 stocks. The twelve Indian economic sectors that these stocks cover are information technology, consumer goods, financial services, media and entertainment, metals, pharmaceuticals, telecommunications, cement and related products, cars, energy, fertilizers and pesticides, and other services.
NIFTY is one of the two national indices; the other being the Bombay Stock Exchange-produced SENSEX. The National Stock Exchange Strategic Investment Corporation Limited, a wholly owned subsidiary, owns it through India Index Services and Products (IISL).
The NIFTY 50 index tracks the movements and tendencies of blue-chip businesses, or the biggest and most liquid Indian stocks. NIFTY is a group of indices that are part of the NSE's Futures and Options (F&O) segment, which deals with derivatives. These indexes include NIFTY 50, NIFTY IT, NIFTY Bank, and NIFTY Next 50.
How NIFTY Index Works
Every six months, the NIFTY Index is recreated, taking stock performance into account. The list may include or exclude new or old stocks based on this performance and the fact that a company and its shares meet all the qualifying requirements stated above. Four weeks prior to reconstitution, the companies concerned are notified through notice of any new additions or eliminations.
In addition to being done on a regular basis, reconstitution can also be done when a corporation goes through a plan of arrangements for things like suspension, spin-off, merger, and forced delisting. In addition to this, as per the SEBI mandate that was revealed on January 10, 2019, the NIFTY share market is required to carry out a quarterly inspection of firms to verify their compliance with portfolio concentration restrictions for Index Funds and ETFs.
How is NIFTY Share Market Calculated?
Professionals from the NSE Indices Limited oversee a team that manages the NIFTY share index. It established an Index Advisory Committee to provide knowledge and direction on broad matters pertaining to stock indexes.
The market capitalization weighted and float-adjusted methodology is used to calculate the NIFTY 50 indexes. With this approach, the index level shows the total market value of the stocks that make up the index during a given base period. For an NIFTY 50 index, this base period is November 3, 1995, when the index's base capital is Rs. 2.06 trillion and its base value is 1000.
The following is the price index calculation formula:
Index value is calculated as follows: current market value (MV) / (BMC * 1000).
The methodology used to calculate the indices also takes into account modifications to corporate actions, such as stock splits and the issuing of rights, among other things.
All Indian equities markets are compared to the NIFTY share market index as a benchmark. To guarantee that the index stays steady and continues to serve as the benchmark in the context of the Indian stock market, NSE maintains it on a regular basis.