We all might have seen people talking about Nifty50, as they talk about how its points increased or decreased in the market today. Do you know what is nifty50? It is a market index introduced by National Stock Exchange. This is an index coined by NSE on 21st April 1996. This is the index that acts as the benchmark that showcases the equity stocks of the top 50 companies out of 1600 stocks. All of these companies might be from different sectors of the Indian economy like IT, financial services, consumer goods, media, entertainment, metals, pharmaceuticals, automobiles, energy, pesticides, and fertilizers, etc.
Another important index of the Indian market is Sensex. It is an index that is derived from the Bombay Stock Exchange. These are the two very important indexes that are looked upon by almost every Indian dealing in the stock market. The nifty50 index follows the patterns and trends of all the blue0chip companies that have the largest and most liquid Indian securities.
To get your company in the Nifty50 index, here are some of the eligibility criteria that are required to be followed for getting the listing. Let’s have a look at them.
- The company must be registered with the National Stock Exchange and must be a Domicile of India.
- All the stocks of the company must possess high liquidity which is easily measured by average impact cost. The cost of the security transactions must be lower .50% lower for 6 months.
- The company must be trading in the market with a frequency of 100% for the last six months.
- The average free-floating market capitalization must be 1.5 times higher than the small constituent in the index.
- The company must have Differential Voting Rights.
After every six months, the Nifty50 index is reconstituted and the performance of the stocks can be derived. According to this, the company will be considered eligible and can easily qualify for them being in the index of nifty50. Every four weeks the entrance and elimination of the company in the index are told to the public.
The index of nifty50 is managed by the team of experts at the National Security Exchange. The team of experts is selected by the Index Advisory Committee. This index is calculated on the grounds of the float-adjusted and market capitalization-weighted method. The aggregate of all the companies is taken to bring an approximate value to the company. The formula to calculate the index is given below:
Index value = Current Market Value / (Base Market Capital* 1000)
The nifty50 acts as the benchmark for knowing the performance of different companies. It will clearly state the conditional of the Indian Stock market to the people at the global level. If the Nifty50 increases, that means the Indian stock market is in good condition and vice versa.
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