A staple across financial papers and news about stock markets in India, the term “NIFTY 50” is ubiquitous in its presence. However, for novice investors and those who are uninitiated into the world of finance, NIFTY 50 could come across as just another finance jargon. Below is a breakdown of its significance and ways to start investing in NIFTY 50 stocks.
What is NIFTY 50?
The NIFTY 50 is an index of the country’s top 50 companies by market capitalization that are listed on the National Stock Exchange (NSE). It is one of the two most referenced barometers used by investors to track how the “stock market is doing”. The other is the Sensex – a similar index of 30 stocks managed by the Bombay Stock Exchange (BSE).
Even though there are 1,300 stocks listed on the NSE, when someone says “the market was up today”, they usually mean the NIFTY 50 index was up. This further means the weighted average performance of those 50 stocks was up. For foreign investors tracking the Indian markets, their first reference point is NIFTY movement and their first few investments in India are usually in NIFTY stocks.
History of the NIFTY 50
Back in the 1960s and 1970s, NIFTY 50 referred to the fifty most popular large cap stocks on the New York Stock Exchange. These stocks were regarded as sure-shot quality buys or blue-chip stocks that were best-in-class and traded at high valuations. Companies such as Coca-Cola, Xerox and IBM are examples of the NIFTY 50 stocks that investors didn’t need to think twice about before buying. Then, in 1996, the NIFTY 50 took on additional meaning when the NIFTY 50 Index appeared on the National Stock Exchange of India and became a staple feature of the Indian stock market.
How are the NIFTY 50 Stocks Chosen?
Most NIFTY 50 companies exhibit a strong balance sheet, robust growth numbers and an expansive global footprint. To put this in perspective, some of the companies in the NIFTY 50 Index are Infosys, Reliance Industries, HDFC…