Nifty50- A Detail Analysis of Index for Indian Market

#NSE0036– The Nifty50 is indeed a diversified stock index representing various sectors of the economy in India. It’s managed by the National Stock Exchange of India (NSE) and consists of 50 actively traded stocks from various sectors such as banking, IT, FMCG, and more.

• Free Float Market Capitalization: The #Nifty50 index is computed using the free float market capitalization method. This means that only the market capitalization of the freely tradable shares of a company is taken into account. It provides a more accurate representation of the market value of a company compared to methods that include all shares, including those held by insiders or governments.
• Launch Date: The Nifty 50 index was launched on April 22, 1996. This marks the date when the index was first introduced to the market.
• Base Date and Base Value: The base date for the Nifty 50 index is November 3, 1995, and the base value is set at 1000. This serves as the reference point from which the performance of the index is measured.
• Number of Constituents: The Nifty 50 index consists of 50 constituents. These are blue-chip, large, and liquid stocks traded on the National Stock Exchange of India (NSE).
• Methodology: The methodology used to calculate the Nifty 50 index includes the free float market capitalization method, as mentioned earlier. Additionally, the index is rebalanced semi-annually, with the cutoff dates for rebalancing being January 31 and July 31 of each year. The methodology ensures that the index remains representative of the Indian equity market and reflects changes in market conditions over time.

Here’s a summary of the sector weights:

• Financial Services: 34.29%
• Oil, Gas & Consumable Fuels: 12.69%
• Information Technology: 12.32%
• Fast Moving Consumer Goods: 8.04%
• Automobile and Auto Components: 7.79%
• Construction: 4.27%
• Healthcare: 4.24%
• Metals & Mining: 3.96%
• Telecommunication: 3.45%
• Power: 3.11%
• Consumer Durables: 2.81%
• Construction Materials: 2.05%
• Services: 0.98%

List of the top constituents along with their respective weightages:

1. HDFC Bank Ltd.: 11.48%
2. Reliance Industries Ltd.: 9.96%
3. ICICI Bank Ltd.: 8.11%
4. Infosys Ltd.: 5.09%
5. Larsen & Toubro Ltd.: 4.27%
6. Tata Consultancy Services Ltd.: 3.89%
7. ITC Ltd.: 3.88%
8. Bharti Airtel Ltd.: 3.45%
9. Axis Bank Ltd.: 3.32%
10. State Bank of India: 3.18%

The eligibility criteria for the selection of constituent stocks for the Nifty 50 index are outlined as follows:

1. Market Impact Cost: Stocks considered for inclusion in the Nifty 50 must have traded at an average impact cost of 0.50% or less during the last six months for 90% of the observations, for a basket size of Rs. 100 million. Market impact cost is a measure of liquidity that reflects the costs incurred when actually trading a stock.
2. Listing History: The company should have a listing history of at least 6 months.
3. Futures & Options (F&O) Segment: Only companies allowed to trade in the Futures & Options (F&O) segment are eligible to be constituents of the index.
4. Minimum Listing History: The company should have a minimum listing history of 1 month as of the cutoff date.

Index Re-Balancing:

• The Nifty 50 index is rebalanced on a semi-annual basis.
• The cutoff dates for rebalancing are January 31 and July 31 of each year.
• For the semi-annual review of indices, average data for the six months ending on the cutoff date is considered.
• A four-week prior notice is given to the market from the date of change to inform about any adjustments in the index constituents.

These criteria ensure that the Nifty 50 index comprises liquid, established companies with a track record of trading in the F&O segment, and undergoes periodic rebalancing to maintain its relevance and representativeness of the Indian stock market.

Here’s the list of companies that have been part of the index since its inception:

1. State Bank of India
2. ICICI Bank Ltd.
3. Tata Steel Ltd.
4. HDFC Ltd.*
5. ITC Ltd.
6. Hindalco Industries Ltd.
7. Hindustan Unilever Ltd.
8. Tata Motors Ltd.
9. Larsen & Toubro Ltd.
10. HDFC Bank Ltd.
11. Bajaj Auto Ltd.
12. Reliance Industries Ltd.

These companies have maintained their presence in the Nifty 50 index since its inception in November 1995, showcasing their enduring strength and significance in the Indian stock market.

*source- NSE – National Stock Exchange of India Ltd: Live Share/Stock Market News & Updates, Quotes- Nseindia.com and NIFTY Indices