Nifty 50 Trading

Nifty 50 index CFD trading at AvaTrade

What is Nifty 50

One of the two main stock indices used in India, the Nifty 50 is India’s benchmark stock market index for their equity market. It represents a well-diversified, weighted average of 50 of the most profitable Indian company stocks within 12 sectors.

Nifty 50 was established on the 21st of April 1996 and is comprised of many stock indices of Nifty. This index is owned and managed by India Index Services and Products (IISL).

From 2008 to 2012 the Nifty 50 Index share of overall stock market capitalization fell dramatically  (from 65% to 29%) mainly due to the rise of other sectoral indices.

Index Composition and Calculation

The Nifty 50 is a free float capitalization weighted index. This changed in June 2009, when up until then the index was calculated on full market capitalization methodology.

The base value of the Nifty 50 has been set at 1000 and a base capital of Rs 2.06 trillion.

The NIFTY 50 price is calculated using the free-float market capitalization weighted method, where the price level of the Index indicates the total market value of all components relative to the base value on November 3, 1995.

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

Top 10 Nifty 50 components
Name of Company Industry Weight (%)
HDFC Bank Ltd Banking & Financial Services 9.60
Reliance Industries Ltd. Oil & Gas Trading 7.77
Housing Development Finance Corporation Banking & Financial Services 6.79
ITC Ltd. Consumer Goods 5.55
ICICI Bank Ltd Banking & Financial Services 5.01
Infosys Ltd Information Technology 4.96
Larsen & Toubro Ltd Infrastructure 3.81
Kotak Mahindra Bank Ltd Banking & Financial Services 3.39
Tata Consultancy Services Ltd Information Technology 3.33
State Bank of India Banking & Financial Services 3.02
Nifty 50 Sector Representation
Sector Weight (%)
Financial Services 35.73
Energy 15.19
IT 11.20
Automobile 10.32
Consumer Goods 9.17

The Factors Influencing Overall Index Price of the Nifty

There are many internal (country-wide) and external (sectional economic shifts) factors that influence the NIFTY 50 price. The stability of the government is a major player in the trajectory of the NIFTY. Elected presidents and changes within parliament have, in the past, sent the index yo-yoing to record highs and lows, with stability coming months after. Changes in RBI repo rates in the past also sent the markets into a spiral.

The financial sector accounts for almost 30% of the index’s composition. This is why, during times of recession or economic booms, market upheavals often occur. For example, the recession of 2008 which was responsible for more than a 10% loss in the Industry Production Index (IIP), the overall view of Industrial growth. IIP took a nose dive when the Chinese Industry Production Index boomed in 2015 and the NIFTY experienced a bearish market and fell to 490.9 points.

The Performance of the international markets (such as international news) directly impacts the highs and lows of the global stock markets. As there is a constant correlation between world-wide stock indices, the NIFTY also reacts when another stock index behaves in a certain way, thus, making these the biggest economic reflectors. For example, when the S&P (the agency issuing the S&P 500 – an index comprised of 500 large companies having common stock listed on the NYSE or NASDAQ) upgraded India’s credit rating from a negative to a stable, the NIFTY defied all odds and crossed the 8050 level.

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