What is Nifty 50? How can I start trading it on AvaTrade? Table of Contents

What is the Nifty 50?

One of the two largest stock indices used in India, the Nifty 50 is the benchmark stock market index for the Indian stock market.

This index represents the weighted average of 50 companies of the most profitable, well-diversified Indian companies across 12 sectors.

The Nifty 50 was founded on April 21, 1996, and includes and includes several stock indices of the Nifty.

The index is owned and operated by India Index Services and Products (IISL).

From 2008 to 2012, the general stock market capitalization of the Nifty 50 index dropped dramatically (from 65% to 29%), mostly due to the rise of other sector indices.

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Composition and Calculation of Nifty 50

Since 2009, the Nifty 50 has been a free-float adjusted market capitalization-weighted index.

Previously, the index was still calculated using the full market capitalization method.

The base value of the Nifty 50 was set at 1000, with a base capital of Rs 2060 billion.

The price of the NIFTY 50 is calculated using the weighted market capitalization method adjusted for free float, where the price level of the index indicates the total market value of all components compared to the base value as of November 3, 1995.

Index value = current market value / base market capital x base index value (1000)

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The 10 major companies of the Nifty 50

Company Name Sector Value (%)
HDFC Bank Ltd Banking and financial services 9.60
Reliance Industries Ltd. Oil & Gas 7.77
Housing Development Finance Corporation Banking and Financial Services 6.79
ITC Ltd. Consumer goods 5.55
ICICI Bank Ltd Banking and financial services 5.01
Infosys Ltd Information Technology (IT) 4.96
Larsen & Toubro Ltd Infrastructure 3.81
Kotak Mahindra Bank Ltd Banking and Financial Services 3.39
Tata Consultancy Services Ltd Information Technology 3.33
State Bank of India Banking and Financial Services 3.02

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What influences the price of Nifty 50 index?

There are many internal (country-related) and external (sectoral economic changes) factors that affect the price of the NIFTY 50. Government stability is an important factor in the NIFTY trajectory. Presidents-elect and changes within the government, in the past, have pushed the index to swing like a yo-yo from record highs to lows, until it finds stability months later. Changes in the RBI’s repo rates in the past have pushed the markets into a spiral.

The financial sector makes up almost 30% of the composition of the index. That is why, during times of economic boom or recession, the market is particularly affected. The 2008 recession, for example, led to a 10% loss of the Industrial Production Index (IIP), a general indicator of industrial growth. The IIP also fell sharply when the Chinese Manufacturing Index boomed in 2015, with the NIFTY experiencing a bear market, for a decline of 490.9 points.

The performance of international markets (such as international news) directly affects the highs and lows of global equity markets. Since there is a constant correlation between global stock indices, the NIFTY also reacts when other stock indices behave in a certain way, making them the main economic spotlight. For example, when the S&P (the agency that manages the S & P500 – an index that includes the 500 largest companies whose stock is listed on the NYSE or NASDAQ) upgraded India’s credit rating from negative to stable, going against all odds.

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