|
Listen audio version
|
Nifty is a stock market index consisting of 50 stocks that trade on the National Stock Exchange (NSE) India.
This Index was launched in 1996 and quickly became popular among investors from all over the world.
The Nifty is one of the most popular benchmarks used by investors in India for tracking their investments’ performance against an index or as part of a portfolio.
It includes 50 stocks from diverse sectors, with some weightage given to each sector depending on its importance to India’s economy.
The nifty index contains the largest and most liquid stocks listed on NSE in terms of market capitalization.
It is a free-float market-capitalization-weighted index, so the stocks included in it will change from time to time.
For example, if the market capitalization of a company changes drastically due to some reasons (like mergers or splits), it may be removed from the Nifty or added into it.
The Nifty is one of India’s most actively traded indexes and serves as a representation of the broader Indian economy.
The index for measuring performance began at 1000 points on April 22nd, 1996, increasing every year.
Investors who have been investing during that time were able to see great results through gains seen throughout those years when compared against other investments like property or gold.
Nifty is used to represent the entire market (or a large segment) for a variety of products, including nifty-based exchange-traded funds, nifty derivative contracts such as nifty future and nifty option.
Table of Contents
The benefits of using the nifty index in your investments?
The Nifty index is the best indicator in India for stock market performance.
If you want your investment portfolio to give good returns, use the Nifty index as your benchmark.
That way, you can be reasonably sure of outperforming the benchmark; since it’s a leading indicator and stocks move together on all major indexes.
If you make an investment portfolio to outperform the Nifty in a year, then you may not be able to beat it.
But over 5 years, 10 years or 20 years (and more), your portfolio should perform better than the index.
It is an advantage to use the Nifty-50 stocks for your investment portfolio because:
- You can get the diversification of your portfolio among 50 different companies.
- You can get better returns compared to fixed deposits and other debt instruments.
- FIIs (Foreign Institutional Investors) invest in Indian Equities.
- The companies listed in this index are large, strong, financially sound and the risk of them being wiped out is also minimal.
Today, NIFTY 50 and its constituents are followed by millions of investors in India and all over the world because of their size and influence.
It is indeed a brand name for the Indian equity market internationally.
Being the first index that had global recognition along with the potential to give high returns, many new investors made their first investment in the Indian stock market by buying NIFTY 50 stocks.
Why choose between Nifty over another index:
Nifty and Sensex are both leading stock indexes in India. These two indexes can be seen as close substitutes for each other in terms of choices.
But there are three major considerations to choose Nifty over others:
1) The trading frequency (higher for Nifty).
2) Presence of foreign ownership.
3) Trading volume – higher volume for a lower cost per trade.
Which sectors are covered in Nifty?
The composition of the index is decided by an independent committee at National Stock Exchange (NSE).
The sectors covered by Nifty include:
| S.No. | Sector Name | Weight |
|---|---|---|
| 1 | Financial Services | 37.20% |
| 2 | IT | 17.43% |
| 3 | Oil & Gas | 11.68% |
| 4 | Consumer Good | 11.09% |
| 5 | Automobile | 5.34% |
| 6 | Metals | 3.56% |
| 7 | Pharma | 3.58% |
| 8 | Construction | 2.66% |
Which Stocks are there in Nifty (As of July 2021)?
The stocks in Nifty50 are:
| Company Name | Sector | Weight | |
|---|---|---|---|
| 1 | Reliance Industries Ltd. | Energy – Oil & Gas | 10.77% |
| 2 | HDFC Bank Ltd. | Banking | 10.66% |
| 3 | Infosys Ltd. | IT | 7.42% |
| 4 | Housing Development Finance Corporation Ltd. | Financial Services | 7.29% |
| 5 | ICICI Bank Ltd. | Banking | 6.59% |
| 6 | Tata Consultancy Services Ltd. | IT | 4.86% |
| 7 | Kotak Mahindra Bank Ltd. | Banking | 4.16% |
| 8 | Hindustan Unilever Ltd. | Consumer Goods | 3.04% |
| 9 | AXIS Bank Ltd. | Banking | 2.87% |
| 10 | ITC Ltd. | Consumer Goods | 2.84% |
| 11 | Larsen & Toubro Ltd. | Construction | 2.78% |
| 12 | State Bank of India | Banking | 2.39% |
| 13 | Bajaj Finance Ltd. | Financial Services | 2.23% |
| 14 | Bharti Airtel Ltd. | Telecommunication | 2.13% |
| 15 | Asian Paints Ltd. | Consumer Goods | 1.64% |
| 16 | HCL Technologies Ltd. | IT | 1.58% |
| 17 | Maruti Suzuki India Ltd. | Automobile | 1.46% |
| 18 | Mahindra & Mahindra Ltd. | Automobile | 1.23% |
| 19 | UltraTech Cement Ltd. | Cement | 1.13% |
| 20 | Sun Pharmaceutical Industries Ltd. | Pharma | 1.03% |
| 21 | Wipro Ltd. | IT | 0.97% |
| 22 | IndusInd Bank Ltd. | Banking | 0.96% |
| 23 | Titan Company Ltd. | Consumer Goods | 0.94% |
| 24 | Bajaj Finserv Ltd. | Financial Services | 0.93% |
| 25 | Nestle India Ltd. | Consumer Goods | 0.92% |
| 26 | Tata Motors Ltd. | Automobile | 0.92% |
| 27 | Tech Mahindra Ltd. | IT | 0.91% |
| 28 | HDFC Life Insurance Co. Ltd. | Insurance | 0.88% |
| 29 | Power Grid Corporation of India Ltd. | Energy – Power | 0.88% |
| 30 | Dr. Reddy’s Laboratories Ltd. | Pharma | 0.86% |
| 31 | Tata Steel Ltd. | Metals | 0.86% |
| 32 | NTPC Ltd. | Energy – Power | 0.83% |
| 33 | Bajaj Auto Ltd. | Automobile | 0.79% |
| 34 | Adani Port and Special Economic Zone | Infrastructure | 0.79% |
| 35 | Hindalco Industries Ltd. | Metals | 0.79% |
| 36 | Grasim Industries Ltd. | Cement | 0.74% |
| 37 | Divi’s Laboratories Ltd. | Pharma | 0.68% |
| 38 | Hero MotoCorp Ltd. | Automobile | 0.67% |
| 39 | Oil & Natural Gas Corporation Ltd. | Energy – Oil & Gas | 0.65% |
| 40 | Cipla Ltd. | Pharma | 0.64% |
| 41 | Britannia Industries Ltd. | Consumer Goods | 0.63% |
| 42 | JSW Steel Ltd. | Metals | 0.61% |
| 43 | Bharat Petroleum Corp. Ltd. | Energy – Oil & Gas | 0.58% |
| 44 | Eicher Motors Ltd. | Automobile | 0.56% |
| 45 | Shree Cement Ltd. | Cement | 0.56% |
| 46 | SBI Life Insurance Co. | Insurance | 0.54% |
| 47 | Coal India Ltd. | Energy & Mining | 0.51% |
| 48 | UPL Ltd. | Chemicals | 0.49% |
| 49 | GAIL (India) Ltd. | Energy – Oil & Gas | 0.49% |
| 50 | Indian Oil Corporation Ltd. | Energy – Oil & Gas | 0.40% |
Conclusion :
If you’re looking for a stock market index that offers diversification, better returns and stability – the nifty 50 is an excellent choice.
In this article, we’ve covered some of what makes Nifty unique as well as how it can be used in your portfolio to help increase your investment’s long-term potential.
Do you have any questions about investing or trading on India’s National Stock Exchange? Let us know and we’ll be happy to answer them!
