In this article, you will learn about what is Nifty 50, what are the Nifty 50 companies, the weightage of each company, and how Nifty 50 companies are selected?.
What is Nifty 50?
Nifty 50 is an index comprising of 50 stocks from different sectors, Nifty 50 index is well-diversified, which represents the overall market conditions.
We have a lot of indices in India. Like, Nifty 50, Sensex, Nifty Next 50, Bank Nifty Etc. But the most focused and used index all over India is Nifty 50.
The Nifty 50 index represents the whole Indian market scenario. Now you might think, how can only these 50 stocks represent the whole Indian market conditions. Well, because these are the top companies in India and 40% of the trading happens in these 50 companies only.
There are more than 4000 companies in the stock market. But still, 40% of the trading happens in these 50 companies.
What are NIFTY 50 companies?
The Nifty 50 companies are RELIANCE, ONGC, COAL INDIA, TITAN, IOC, HEROMOTOCORP, BPCL, EICHER MOTORS, BAJAJ AUTO, MARUTI, TATA STEEL, ASIAN PAINTS, KOTAK BANK, HINDALCO, DR REDDY, GRASIM, JSW STEEL, INFOSYS, BRITANNIA, TATA MOTORS, DIVIS LAB, LARSEN & TOUBRO, WIPRO, ITC, NTPC, TECH MAHINDRA, BAJAJ FINANCE, SHREE CEMENTS, SBI, BAJAJ FINSERV, HACL TECH, ADANI PORTS, SBI LIFE, POWER GRID, TCS, ICICI BANK, NESTLE INDIA, SUN PHARMA, UPL, M&M, AXIS BANK, TATA CONSUMER, ULTRATECH CEMENT, INDUSIND BANK, HDFC, HDFC BANK, HDFC LIFE, BHARTI AIRTEL, HINDUSTAN UNILEVER, And CIPLA.
The weightage of these 50 companies varies, some companies will have higher weightage and some companies will have lower weightage.
NIFTY 50 weightage
- Reliance Industries – 9.83%
- HDFC Bank – 9.29%
- Infosys Ltd – 8.52%
- HDFC – 6.79%
- ICICI Bank – 6.70%
- TCS – 5.28%
- Kotak Mahindra Bank – 3.46%
- Hindustan Unilever – 3.27%
- AXIS Bank – 2.73%
- Larsen Toubro – 2.72%
- Bajaj Finance – 2.69%
- ITC – 2.49%
- Stata Bank Of India ( SBI ) – 2.20%
- Bharti Airtel – 2.11%
- Asian Paints – 1.94%
- HCL Technologies – 1.73%
- Tata Steel – 1.53%
- Bajaj Finserv – 1.40%
- Wipro – 1.28%
- Maruti Suzuki – 1.23%
- UltraTech Cement – 1.22%
- Tech Mahindra – 1.21%
- Sun Pharma – 1.15%
- Titan – 1.08%
- Mahindra & Mahindra – 1.02%
- Nestle – 0.94%
- Hindalco – 0.92%
- JSW Steel – 0.90%
- Divi’s Labs – 0.89%
- IndusInd Bank – 0.81%
- Power Grid – 0.81%
- HDFC Life – 0.80%
- Grasim Industries – 0.77%
- DR Reddy’s – 0.77%
- NTPC – 0.74%
- Adani Ports – 0.74%
- SBI Life – 0.71%
- Tata Consumer – 0.70%
- Tata Motors – 0.69%
- Bajaj Auto – 0.65%
- Cipla – 0.65%
- Britannia – 0.64%
- ONGC – 0.59%
- BPCL – 0.59%
- UPL – 0.55%
- Shree Cements – 0.51%
- Eicher Motors – 0.50%
- Hero MotoCorp – 0.48%
- Coal India – 0.41%
- IOC – 0.38%
Reliance Industries has the highest weightage in Nifty 50 and then HDFC bank with a slight difference. If these companies’ stock price falls, It will heavily impact the Nifty 50 index. Because these stocks have the highest weightage in Nifty 50.
If the companies with lower weightage like UPL, BPCL, IOC, or Eicher motors, Even these companies stock price falls, it will not affect the Nifty 50 index. As the weightage of these companies is very low or negligible.
The top 7 companies alone have 50% weightage in Nifty 50 and the other 43 companies combined have the remaining 50% weightage.
By this, we can understand, if the top seven companies’ stock price falls, this will heavily affect the index.
NIFTY 50 Rebalancing
Above we have seen, what are the companies are in Nifty 50 and their weightage.
But, these companies and their weightage’s are not permanent. The Nifty 50 index is rebalanced semi-annually. Which means, two times a year.
The Nifty 50 is rebalanced on January 31 and July 31. For this rebalancing, the last six months’ data of the companies is taken into consideration.
How NIFTY 50 stocks are selected?
Till now you have learnt about which companies or stocks are there in the Nifty 50 Index and their weightage in the Nifty 50 index. You might have a doubt that there are thousands of companies in India, but why only these 50 companies? why not other companies?.
To know this, Firstly, you need to know what is free-float market capitalization.
There are other eligibility criteria’s considered as well before adding a company to the Nifty 50 index. But finally, the companies are selected and weighted based on the free-float market capitalization. Free float market capitalization is considered as an important thing while adding a company to the Nifty 50 index.
To Know The Complete Details Of Eligibility Criteria Click Here And Read Second Page.
Free float market capitalization
Free float market capitalization means the total number of shares that are readily available for trading multiplied by the share price of the company.
You might think that all shares are readily available for trading. No, it is wrong.
The shares held by promoters or government are not available for trading and these shares are not counted while calculating free-float market capitalization.
Some companies also acquire shares with a lock-in period. This means companies are not allowed to sell or trade their shares till the Lock-In period expires. These shares are also not considered while calculating free-float market capitalization.
Free Float Market Capitalization = Total No Of Shares Available For Trading X Current Price Of The Stock.
This is the important factor considered while adding a stock to the index.
Nifty is in green but my portfolio is in red?
a lot of beginners think that if the Nifty is increasing, then their portfolio should also increase and If the Nifty increases, but their portfolio is in red, they worry why their stocks are not increasing.
If the Nifty increases, it will have a positive impact on the whole market. But it doesn’t mean every stock price will increase along with Nifty. In Nifty the top seven companies alone have 50% of weightage. If the top 8 companies perform Well and the remaining 42 companies fall also the Nifty will end up in green.
But most of the stocks are in red. So focus on an individual stock, if the company is doing well, the price of the stock will increase even when Nifty is falling.
If Nifty is increasing, it doesn’t mean your portfolio will also increase. It all depends on the performance of the individual stock or a company. But an increase in Nifty will Have some positive impact on the whole Indian market scenario and vice versa.