What Is Nifty And How Does It Work?

Nifty Full Form 

The full form of Nifty is National Fifty. It's the benchmark index of the NSE (National Stock Exchange). Nifty originally was known as CNX Nifty in 1996, it was later renamed Nifty 50 in 2015.

Nifty Meaning

The term "Nifty" stands for "National Fifty," serving as the benchmark index for the NSE (National Stock Exchange). Initially known as CNX Nifty since its establishment in 1996, it was later renamed as Nifty 50 in 2015. This index tracks the performance of the 50 largest and most liquid stocks among over 1,600 stocks listed on the NSE. Representing various industrial sectors, these 50 companies collectively reflect the trends in the Indian stock market and economy. 

Nifty is maintained by India Index Services & Products Limited (IISL), a joint venture between the National Stock Exchange and CRISIL.

Nifty Timings

Nifty operates during the Equity Segment timings, which is from 9:15 am to 3:30 pm, Monday to Friday.

How Nifty Works

Nifty comprises the Top 50 largest companies, and as these stocks move, Nifty moves proportionally. Explore the list of Nifty 50 stocks here.

How is Nifty Constituted?

To be included in the Nifty 50 Index, companies must meet certain criteria:

• The company must have a permanent office in India and be listed and traded on the National Stock Exchange (NSE).

• The company should be part of the Nifty 100 index and available for trading in NSE’s futures and options segment.

• The average free-floating market capitalization of the company should be at least 1.5 times higher than the smallest company in the index.

• The stock should have traded daily with 100% trading frequency over the last six months.

How is Nifty Calculated?

You must be curious about how Nifty is calculated. Well, it's done using the float-adjusted, market capitalization-weighted methodology. The index reflects the total market value of all the stocks in the index relative to a particular base period. The base value of the Nifty is 1000, and the base market capital is ₹ 2.06 trillion.

The formula for calculating the index value is:

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

It's essential to note that the base year of Nifty is 1995.

As you've learned about the meaning of Nifty, which comprises the largest companies from different industrial sectors, similarly, there are Sectoral Indices that track the performance of stocks in specific sectors. Click here to learn more about them. 

How to Invest in Nifty?

Investing in the Nifty index can be done through Index Mutual Funds and Exchange Traded Funds (ETFs). These funds invest in a basket of stocks that replicate the returns of the Nifty index. 

The primary difference between Mutual Funds and ETFs is that ETF prices are actively updated during the day, similar to stocks, and can be bought and sold at live prices. On the other hand, Mutual Fund prices are updated only at the end of the day and can be bought and sold based on the End of the Day Price.

Additionally, you can also trade in Nifty via Futures and Options.

Ready to start investing in the Nifty index? Open an account with us today and explore the investment options!