What does Nifty 50 value represent?

Nifty 50 is India’s most popular and widely followed stock market index. It is essentially a compilation of the country’s top 50 company stocks listed on the National Stock Exchange (NSE). The stocks selected to be a part of this index are the leaders in their respective fields. Since the Nifty 50 is a benchmark index, it provides a snapshot of the overall health of India’s economy.

Recently, Nifty 50 made headlines as it crossed the historic 20,000 level-mark. But have you ever wondered how the value of this index is calculated and what are the factors that influence it?

In this blog, we will explore the meaning and calculation of Nifty 50’s value and how it reflects the broader India’s financial landscape.

Nifty 50: A look at the historic performance

Nifty 50 index was introduced on April 22, 1996 on the National Stock Exchange (NSE). The following chart shows the Nifty 50 performance since the year 2006 till 2021. The index has grown significantly over the years. For example, if you had made an SIP (Systematic Investment Plan) of just Rs.10,000 in Nifty 50, then your corpus would have burgeoned to Rs.53 lakhs in a span of just 15 years. Additionally, despite facing periodic volatility since its inception, Nifty 50 has delivered an annual return of 13%.

Now let us see how the value of this index is calculated.

Nifty 50 Valuation –

The collective value of the Nifty 50 index is calculated using a method called Free Float Market Capitalisation. To understand this, you must first know about a few terms.

• Free Float Shares –

Free Float Shares refer to the outstanding shares of a stock that are available for public trading excluding the shares held by promoters, founders, the government, trusts, etc.

• Base Market Capital –

Base Market Capital is the weighted capital of all the 50 constituents of Nifty 50 in base period. The base year for Nifty 50 is taken as November 3, 1995 with a base value of 1,000.

The formula used in calculating the value of Nifty 50 is:

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

The value derived using this method is the collective value of the Nifty 50 index. This value represents the overall performance of the top 50 stocks listed on the National Stock Exchange and is considered as a key factor in determining the overall health of the Indian Stock Market.

List of Nifty 50 companies –

Here is a list of the total 50 constituents and their weightage in the Nifty 50 index as of 2023:

Company & Stock Symbol

Weightage

Industry

HDFC Bank (HDFCBANK)

13.77%

Financial Services

Reliance Industries (RELIANCE)

9.56%

Oil & Gas

ICICI Bank (ICICIBANK)

7.87%

Financial Services

Infosys (INFY)

6.01%

Information Technology

ITC (ITC)

4.55%

FMCG

Tata Consultancy Services (TCS)

4.04%

Information Technology

Larsen & Toubro Ltd (L&T)

3.84%

Construction

Axis Bank (AXISBANK)

3.13%

Financial Services

Kotak Mahindra Bank (KOTAKBANK)

3.04%

Financial Services

Hindustan Unilever (HINDUNILVR)

2.93%

FMCG

State Bank of India (SBIN)

2.77%

Financial Services

Bharti Airtel (BHARTIARTL)

2.56

Telecommunication

Bajaj Finance (BAJFINANCE)

2.29%

Financial Services

Asian Paints (ASIANPAINT)

1.77%

Consumer Durables

Mahindra & Mahindra (M&M)

1.45%

Automobile

Maruti Suzuki India (MARUTI)

1.53%

Automobile

HCL Technologies (HCLTECH)

1.49%

Information Technology

Sun Pharma (SUNPHARMA)

1.30%

Healthcare

Titan Company (TITAN)

1.45%

Consumer Durables

LTIMindtree Ltd (LTIM)

1.23%

Information Technology

Adani Enterprises (ADANIENT)

0.84%

Metals & Mining

Tata Steel (TATASTEEL)

1.05%

Metals & Mining

Bajaj Finserv (BAJAJFINSV)

0.97%

Financial Services

UltraTech Cement (ULTRACEMCO)

1.12%

Construction Materials

NTPC (NTPC)

1.02%

Power

IndusInd Bank (INDUSINDBK)

1.03%

Financial Services

Power Grid Corporation (POWERGRID)

0.98%

Power

JSW Steel (JSWSTEEL)

0.81%

Metals & Mining

Tata Motors (TATAMOTORS)

1.14%

Automobile

Nestle India (NESTLEIND)

0.95%

FMCG

Hindalco Industries (HINDALCO)

0.73%

Metals & Mining

Grasim Industries (GRASIM)

0.78%

Construction Materials

Tech Mahindra (TECHM)

0.86%

Information Technology

Adani Ports and SEZ (ADANIPORTS)

0.69%

Services

Cipla (CIPLA)

0.62%

Healthcare

Wipro (WIPRO)

0.74%

Information Technology

Oil & Natural Gas Corp. (ONGC)

0.74%

Oil & Gas

HDFC Life Insurance Co. (HDFCLIFE)

0.72%

Financial Services

SBI Life Insurance Co. (SBILIFE)

0.68%

Financial Services

Dr. Reddy's Laboratories (DRREDDY)

0.67%

Healthcare

Britannia Industries (BRITANNIA)

0.68%

FMCG

Coal India (COALINDIA)

0.62%

Oil & Gas

Tata Consumer Products (TATACONSUM)

0.58%

FMCG

Apollo Hospitals Enterprise (APOLLOHOSP)

0.57%

Healthcare

Eicher Motors (EICHERMOT)

0.62%

Automobile

Divi's Laboratories (DIVISLAB)

0.54%

Healthcare

Bajaj Auto (BAJAJ-AUTO)

0.64%

Automobile

UPL (UPL)

0.44%

Chemicals

Hero MotoCorp (HEROMOTOCO)

0.44%

Automobile

Bharat Petroleum Corp. (BPCL)

0.43%

Oil & Gas

Reference – (Link)

Conclusion

The Nifty 50 index serves as a barometer for assessing the overall health and performance of India's capital markets. This index is more than just numbers fluctuating on your screen; it mirrors the pulse of India’s financial health and is a crucial tool for investors and financial analysts alike.

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