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Understanding How is Nifty 50 Calculated: At the start of this new Year 2021, the Nifty touched the new height of  14,000 points for the first time ever. A good sign for the Indian markets as they keep soaring higher. But have you ever wondered how the index value was arrived at? 

Today, we discuss the calculation of one prominent index in Indian markets called the Nifty 50. Here, we’ll discuss How is Nifty 50 Calculated and also look into the constituents of Nifty50. Let’s get started. 

What is Nifty 50?

An Index is basically the stock exchange creating a portfolio of the top securities held by it. Indexes have always played an important role for both investors and companies by offering a reliable benchmark. Investors may use it to compare the performance of the index vs. their portfolio and the management of a company may use it to judge the performance of their company’s stock.

Indexes have also been used as an investment strategy where Investment Managers just set up their fund portfolios to simply track the index in an attempt to gain similar market returns. Indexes play an important role as they also stand in the representation of a country’s market and economy.

Nifty is derived from ‘National’ (National Stock Exchange) and Fifty. The Index was founded in the year 1992 and began trading in 1994. It is owned and managed by the India Index Service and Products (IISL). The Nifty 50 is a broad market index that acts as an indicator of market movements.

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As the Nifty 50 includes the biggest Indian companies it captures 65% of the float-adjusted market capitalization of the NSE. It is therefore considered a true reflection of the Indian stock markets.

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What is Nifty and Sensex? Basics of Stock Market Index!

How is Nifty 50 calculated?

The Nifty 50 index is calculated using the Float-adjusted and Market Capitalization Method. This method reflects the total market value of all the 50 stocks in the index relative to the base period. The base period for the Nifty 50 is taken as November 3, 1995.

The First step includes the calculation of the Mcap of all the companies. This represents the total value of all the shares of a company held by investors in the market. 

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Market capitalization = (Shares Outstanding) x (Current Price)

The Second step includes multiplying the Mcap with the Investable Weight Factor (IWF). The Investible weight is a factor used to determine the shares available for trading. only considers shares that are available for public trading. This excludes shares held by company promoters, government, shares given to employees, etc.

Free-float Market Capitalization = (Market capitalization) x  (Investable Weight Factor(IWF))

Third Step. Here, the Free Float Market Cap is then multiplied by the weight assigned to the individual stock.

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 Therefore the calculation for an individual stock would look as follows

Weighted Free Float Market Cap = (Market Cap) x (IWF) x (Weight)

Fourth Step. We now divide the current market value with its base value from 1995 in order to arrive at the value of the Index. The Current Market Value is the sum total of the Weighted Free-float Market Cap of all the stocks. The Base Market Capital is taken from 1995 which stands at Rs. 2.06 trillion.

Index Value = (Current Market Value/Base Market Capital) * 1000

Meet the Nifty 50 Stocks

Sl NoCompanyIndustryWeightage
1Reliance Industries Ltd.OIL & GAS12.94%
2HDFC Bank Ltd.FINANCIAL SERVICES8.55%
3Infosys Ltd.IT7.73%
4ICICI Bank Ltd.FINANCIAL SERVICES7.11%
5Housing Development Finance Corporation Ltd.FINANCIAL SERVICES5.68%
6Tata Consultancy Services Ltd.IT4.89%
7Kotak Mahindra Bank Ltd.FINANCIAL SERVICES3.53%
8ITC Ltd.FMCG3.46%
9Hindustan Unilever Ltd.FMCG2.88%
10Larsen & Toubro Ltd.CONSTRUCTION2.72%
11State Bank Of IndiaFINANCIAL SERVICES2.58%
12AXIS Bank Ltd.FINANCIAL SERVICES2.43%
13Bharti Airtel Ltd.TELECOM2.39%
14Bajaj Finance Ltd.FINANCIAL SERVICES2.08%
15Asian PaintsCONSUMER DURABLES1.76%
16Maruti Suzuki India Ltd.AUTOMOBILE & AUTO COMPONENTS1.63%
17Mahindra & Mahindra Ltd.AUTOMOBILE & AUTO COMPONENTS1.51%
18HCL Technologies Ltd.IT1.49%
19Sun Pharmaceutical Industries Ltd.HEALTHCARE1.30%
20TitanCONSUMER DURABLES1.17%
21Tata Motors Ltd.AUTOMOBILE & AUTO COMPONENTS1.07%
22Power Grid Corporation of India Ltd.POWER1.05%
23Tata Steel Ltd.METALS & MINING1.01%
24NTPC Ltd.POWER0.98%
25Bajaj Finserv Ltd.FINANCIAL SERVICES0.96%
26UltraTech Cement Ltd.CONSTRUCTION MATERIALS0.94%
27Tech Mahindra Ltd.IT0.91%
28Nestle India Ltd.FMCG0.90%
29Wipro Ltd.IT0.89%
30Oil And Natural Gas Corporation Ltd.OIL & GAS0.85%
31JSW Steel Ltd.METALS & MINING0.79%
32Dr. Reddy’s Laboratories Ltd.HEALTHCARE0.77%
33IndusInd Bank Ltd.FINANCIAL SERVICES0.75%
34HDFC Life Insurance Co.FINANCIAL SERVICES0.74%
35Grasim Industries Ltd.CONSTRUCTION MATERIALS0.72%
36Cipla Ltd.HEALTHCARE0.72%
37Hindalco Industries Ltd.METALS & MINING0.71%
38Adani Port and Special Economic Zone Ltd.SERVICES0.70%
39SBI Life Insurance Co.FINANCIAL SERVICES0.70%
40Bajaj Auto Ltd.AUTOMOBILE & AUTO COMPONENTS0.70%
41Divi’s Laboratories Ltd.HEALTHCARE0.67%
42Tata Consumer Products Ltd.FMCG0.61%
43Britannia Industries Ltd.FMCG0.59%
44Coal India LtdOIL & GAS0.56%
45Eicher Motors Ltd.AUTOMOBILE & AUTO COMPONENTS0.56%
46Appolo HospitalHEALTHCARE0.54%
47Hero MotoCorp Ltd.AUTOMOBILE & AUTO COMPONENTS0.51%
48UPL Ltd.CHEMICALS0.49%
49Bharat Petroleum Corp. Ltd.OIL & GAS0.43%
50Shree Cement Ltd.CONSTRUCTION MATERIALS0.37%

ALSO READ

Nifty 50 Companies List – Nifty50 Stocks by Weight (2022)

Closing Thoughts 

The value of the index changes on a real-time basis in relation to changes in the stock price. Over time older companies that fail are replaced by newer companies that satisfy the requirements of the Index. The calculation shown above is restricted to the Nifty. Other Indexes like the Sensex use different base periods, base values, and are computed differently.


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