8 Things you must know about Nifty

The NIFTY 50 is a diversified 50 stock index accounting for 13 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Let us tell you about 9 things that will help you understand the Nifty.

Like the Sensex, Nifty is a popular equity index in India. The Nifty is composed of 50 stocks. The Nifty 50 is owned and managed by NSE Indices Limited. As an index, the Nifty 50 Index represents about 66.8% of the free float market capitalization of the stocks listed on NSE as on March 29, 2019. A highly efficient index, the impact cost of the Nifty for a portfolio size of Rs 50 lakh is about 0.02%.

The Nifty 50 was launched on April 1 in the year 1996, and is one of the many stock indices of NSE. It can be traded and invested in by investors as well as market intermediaries. Other popular indices include Bank Nifty, Nifty IT just to name a few. Do note that Nifty index variants include NIFTY50 USD, NIFTY 50 Total Returns Index and NIFTY50 Dividend Points Index.

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In terms of sector representation, the Nifty consists of stocks from key sectors of the Indian economy. Financial services accounts for 40.39% weight, followed by Energy 14.38%, IT 13.71%, Consumer goods 10.66%, Automobiles 5.71%, Construction 3.99%, Metals 3.61%, Pharmaceuticals 2.15%, Telecom 1.84%, Cement & cement products 1.74%, Fertilisers & pesticides 0.72%, Services 0.67% and Media & entertainment 0.42%.

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Think of the Nifty like you think of a wallet. Your wallet contains coins, Rs 10/20/50 notes, Rs 100 notes, Rs 500 notes and Rs 2000 notes. Similarly, the Nifty contains of different stocks. In terms of specific stocks, the top Nifty constituents are HDFC Bank Ltd. 10.99%, Reliance Industries Ltd. 8.93%, Housing Development Finance Corporation 7.85%, ICICI Bank Ltd. 5.87%, Infosys Ltd. 5.79%, ITC Ltd. 4.89%, Tata Consultancy Services Ltd. 4.87%, Kotak Mahindra Bank Ltd. 4.11%, Larsen & Toubro Ltd. 3.99% and Axis Bank Ltd. 3.44%.

Prices of Nifty 50 constituents

From June 26, 2009, NIFTY 50 started being computed based on free float methodology. The index is calculated on a real-time daily basis. Nifty is rebalanced semi-annually.

Investors and/or market intermediaries can get the latest Nifty closing report by clicking here. They can access this page everyday and find out how the Nifty moved intra-day.

Nifty Bank, or Bank Nifty, is an index comprised of the most liquid and large capitalised Indian banking stocks. It provides investors with a benchmark that captures the capital market performance of Indian bank stocks. The index has 12 stocks from the banking sector.

The top stocks of the index include HDFC Bank Ltd. 31.61%, ICICI Bank Ltd. 18.20%, Axis Bank Ltd. 13.02%, Kotak Mahindra Bank Ltd. 12.74% and State Bank of India 10.92%. Bank Nifty, like others, is computed using free float market capitalization method. It's index variant includes NIFTY Bank Total Returns Index or Bank NiFty TRI. The index was launched in 2003.

Nifty Bank, or Bank Nifty

The NIFTY IT index captures the performance of the Indian IT companies. The NIFTY IT Index comprises of 10 companies listed on the NSE. The top stocks in Nifty IT include Tata Consultancy Services Ltd. 27.43% weight, Infosys Ltd. 27.04%, HCL Technologies Ltd. 8.52%, Wipro Ltd. 8.46% and Tech Mahindra Ltd. 8.22%. The Nifty IT index variant is NIFTY IT Total Returns Index.

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on June 12, 2000. The futures and options segment of NSE is heavily dependent on Nifty. In the Futures and Options (FNO) segment, trading in Nifty 50 Index, Nifty IT index, Nifty Bank Index, Nifty Midcap 50 index etc. and single stocks are available. Long term Options on Nifty 50 are also available.

Derivative market news helps you to keep track on the market trend.

In the Futures and Options (FNO) segment, trading in Nifty 50 Index, Nifty IT index and Nifty Bank Index is extremely popular. This is why many investors looking for information and updates about these products.

NIFTY FNO is basically futures on Nifty index. Similarly, FNO Nifty IT is futures on Nifty IT index. All of them have a maximum of 3-month trading cycle and the futures contracts expire on the last Thursday of the expiry month.

Nirmal Bang provides F&O reports on a daily basis. This will help you understand FNO Bank Nifty Updates, NIFTY FNO Updates and FNO Nifty IT Updates in a jargon-less manner.