Explained: What are you investing in when you’re investing in Nifty50
- There are several ways of investing in the Nifty50 index, with index funds being the most popular and passive way of doing it.
- But did you know that two sectors and seven companies contribute nearly half to the entire Nifty50 index?
- Here’s everything you need to know about the Nifty50 index.
AdvertisementIndian equity markets have seen an unprecedented rally after the post-Covid crash in 2020, and this has resulted in an explosion in the number of demat accounts – there are now over 100 million demat accounts in India.
If you are an investor who wants to play it relatively less risky when compared to individual equities, experts and investment advisors have often recommended investing in Nifty50 index funds. What these funds do is allocate their assets in the same proportion as the underlying index. These are passive funds and have a certain expense attached to them.
But what is the Nifty50 index and which are the stocks included in the Nifty50 index? Here’s an explainer to help you understand it.
What is the Nifty50 index?
The Nifty50 is a benchmark index comprising India's top 50 large cap companies. As a result, only the biggest companies are included in this index.
Companies in the Nifty50 index are selected based on four criteria – they should be listed on NSE, their free-float market cap, and their shares should be easily available for trading.
Overall, the Nifty50 index currently has a free-float market cap of over ₹75.5 lakh crore.
NSE rebalances the Nifty50 index two times a year – the most recent rebalancing resulted in the addition of Adani Enterprises to the index, replacing Shree Cements.
The biggest component of Nifty50 remains Reliance, weighing over a tenth of the entire index on its own.
The HDFC twins merger is expected to overshadow the inclusion of Adani Enterprises come September 30. “The HDFC merger will likely result in an unprecedented around 14% of the Nifty50 weight getting replaced by two new incoming stocks with a combined weight of around 1% and the remaining 13% weight getting distributed amongst the existing 48 stocks,” said a report by ICICI Securities, adding that this could result in buying and selling worth ₹48,000 crore.
The top seven companies make up half of the Nifty50 index
Investing in and tracking 50 companies might be a difficult task, but did you know you could gain exposure to half of the Nifty50 index in terms of weightage by investing in just seven companies?
These two sectors account for half of the Nifty50 index
Unsurprisingly, financials and IT sectors together account for over half of the total Nifty50 index.
Here’s the full list of Nifty50 stocks with their weightage
|Stock||Index weight||Stock||Index weight3|
|Reliance Industries||11.71||UltraTech Cement||0.97|
|HDFC Bank||8.67||Nestle India||0.91|
|ICICI Bank||8.01||Adani Ports||0.88|
|ITC||3.65||HDFC Life Insurance||0.77|
|Kotak Mahindra Bank||3.58||Hindalco||0.77|
|Larsen & Toubro||3.07||Grasim||0.77|
|Hindustan Unilever||3.04||JSW Steel||0.75|
|Axis Bank||2.89||SBI Life Insurance||0.74|
|Bajaj Finance||2.29||Tata Consumer||0.66|
|Bharti Airtel||2.28||Dr Reddy's Labs||0.66|
|Maruti Suzuki India||1.56||Coal India||0.65|
|HCL Tech||1.31||Divi's Labs||0.60|
|Sun Pharma||1.24||Eicher Motors||0.58|
|Tata Motors||1.06||Hero MotoCorp||0.48|
|Power Grid||1.01||Shree Cement||0.28|
India has not generated outsized returns for foreign investors, says Ambit’s Nitin Bhasin
India’s space agency wants to design and build reusable rockets for the world
Investment lessons from Rakesh Jhunjhunwala’s 1+1=11 partner, Utpal Sheth
Popular on BI
- Google just developed an AI model that creates music from text prompts — but the company won't be releasing it anytime soon
- Mark Zuckerberg reportedly said he doesn't like seeing 'managers managing managers,' fueling speculation of more layoffs
- ChatGPT creator OpenAI might be training its AI technology to replace some software engineers, report says
- Study find out the potential cause of dementia
- Odisha Health Minister shot at by police officer
- Rajinikanth issues public notice on infringement of rights, warns legal action
- Govt likely to float global tender for HPV vaccine in April; Merck, Serum Institute may participate
- Finance Ministry to stick to privatisation of already announced CPSEs next fiscal