Nifty 50 Companies

Nifty is computed using the free float adjustment methodology.

Market capitalization = Share Price x Number of shares.

Free Float Market Capitalization = Share Price x Shares Outstanding*IWF.

Index Value = Current Market Value / Base Index Value.

*IWF or Investible Weight factor = (Shares Outstanding – Locked-in Shares)/ Shares Outstanding.

Base Index Value = Base Market Capital * 1000.

Base Market capital = The average market price of a group of securities at a specific time. Used for the purpose of indexing.

The index value is computed on a real-time basis every day.

You can invest in Nifty through Nifty index funds or the Nifty ETF. This enables you to invest in all the 50 companies.

Nifty ETF have higher liquidity and slightly lower fees as compared to the Nifty Index Funds making them better investment choice

Inflation + returns - Index funds have consistently generated inflation beating returns over the long term. Coupled with low costs it becomes excellent value for investors.

Diversification – It deploys the investment in multiple companies and sectors thereby reducing risk compared to investing in a single or small set of companies. Over time Nifty 50 replaces the underperforming companies at a market level with performing one.

Wide market presence – Nifty 50 Index funds are quite popular in India and have a substantial market presence.

Low cost - These funds have lower operating expenses as fund managers simply need to replicate the index.

There are two important factors to look at while choosing an index fund – Liquidity and expense ratio. Choosing a fund with high liquidity, allows you to buy and sell with no impact cost. Choosing a fund with low expense ratio or fees improves your returns. Currently, the ICICI Nifty Index fund is popular.

Most index funds will give you similar returns. Thus, looking at past returns will be futile.

Not all stocks in the Nifty 50 index are Blue chips. As stocks are selected in the index using an algorithm, often stocks that are most popular make their way into the index. Some of these companies might lack traits of Blue-chip stocks like dependable earnings, stable dividends, and industry leaders.

Investment in Nifty 50 stocks should be with an aim to build your Core portfolio – a portfolio that is held for the long term and form the backbone of your investments. It is best built of industry leaders and highly efficient companies with low impact from an economic slowdown, competition, or governance issues. They are also less volatile, i.e. lower corrections and quicker return to fair prices. This consistency in return will help you stay invested in the equity market.

Not all Nifty 50 stocks fit this bill and just selective investment is warranted. For details read, ‘ Building a Portfolio with Core and Booster Stocks ’

How to invest in Nifty 50 stocks? The investment approach most suited for Retail investors, is investing in Quality-at-Reasonable-Price. This enables them to stay invested and let compounding do its magic. The best Nifty 50 stocks are usually expensive and very expensive. Investing at very high prices leads to the risk of mediocre returns and steep correction in portfolio worth and eventually exit. But they are available at reasonable prices in a bear market and times of specific temporary setbacks. On such occasions knowing the fair value of the Nifty 50 stocks enables you to invest in them confidently.

Read our blog to know more.