What is nifty and how it is calculated?
May 24, 2021
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Being aware of the concept of nifty is very much important so that people can become successful in the world of stock markets. The term nifty has been derived from the combination of national and 50 and includes a major of 50 actively trading stocks. Nifty is the primary equity benchmark index that has been introduced in the year 1986 by the National Stock Exchange and nifty is the abbreviation of National Stock Exchange 50. Nifty generally comprises 50 actively trading stocks but currently, there are 51 stocks in this particular index. Nifty is owned by India Index Services and Products Limited or IISL. This is a specialized company that focuses on the index as the core product and is one of the largest financial products in the ecosystem with index funds, derivatives, and several other kinds of things.To be eligible for becoming part of nifty 50 the companies need to fulfill different kinds of criteria and some of those criteria are mentioned as follows:
1. The liquidity into the stock market should have been traded at be average of 0.50% or less during the last six months.
2. It should come with float adjustment which means that float-adjusted market capitalisation of the companies must be at least twice of the current small index one statement.
3. The company should trade on NSE and should be domiciled in India only.
How is the nifty calculated?
The nifty is calculated with the help of the free float capitalisation-weighted method where the level of index will be reflecting the total market value of the stock’s relative to the particular base period and the formula has been mentioned as follows:
1. Market capitalisation = equity capital into the price
2. Free float market capitalisation = equity capital * price into investable weight factor
3. The index value = current market value/ base market capital into base index value (1000)
WF is the factor that is utilized in determining the number of shares available for trading and the index has been calculated on a real-time basis every day which will make sure that the value of scrip will also change daily. Many people are confused about the differences between nifty and Sensex but as of now, there is no difference between both of them because both are targeting large capital stocks. Both Nifty and Sensex are the indices of the stock market that are indicating the strength of the market. Nifty reflects the value of the National Stock Exchange and on the other hand, Sensex is the stock market index for the Bombay Stock Exchange. Nifty is considered to be a broader term because it consists of more listed securities and all the other hand Sensex has only 30. Nifty is considered to be a more diversified portfolio in comparison to Sensex because more trading happens in this index. Hence, being aware of all these kinds of basic terms is very much important for the people apart from availing the services of professionals like 5paisa because people need to be very much for their of the basic concept before indulging in actual rates so that they make profitable returns.
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