With this process, the NIFTY 50 index removes stocks that would have fallen in market capitalization. Market participants are given four weeks notice before they make any changes to the index. The companies are replaced on the last trading day of March, June, September and December. The data considered is as per the month ending January and July of every year. The list of Nifty 50 companies does not remain the same throughout the year and it is re-balanced semi-annually based on averages from the six months data. ![]() This method will remain the best because free float shares are the most relevant for traders who look for the importance of having liquidity in a stock. For example, if a company ABC Limited has 50,000 free float shares outstanding in the market and the stock price is at ₹ 1,000, then the free-float market cap of ABC Limited will be 50,000*1,000 = ₹ 5,00,00,000.įor example, Reliance in India or Apple in the US have such a large weight in the index because they have the highest free float shares. Free float market capitalization is calculated as the total free float number of shares outstanding in the market multiplied by current stock price. Larger the free float market cap, higher will be the weight. To address this problem, Nifty 50 weightage stocks calculation is done on the basis of free float market capitalization. They are not fully available to trade in the open market and this hampers the liquidity of a stock to sell and buy. But there is a problem in this method because the shares are held by promoters or by the government in case of PSUs. Calculation of Nifty 50 weighting methodĮarlier, the weighting of a particular stock on any index is done on the basis of the total market capitalization of the company. For example, market capitalization of Infosys is just half that of TCS, it has a higher weighting in the Nifty 50 as compared to TCS as the free float stock of TCS is less and 74% of the total stocks are owned by their promoter Tata Sons. The free float market capitalization is only considered for deciding the weightage on the index because it reflects the true picture of the company. It is decided on the basis of the combination of the market capitalization (total value of the company's stock) and the free float market capitalization (total value of the company's stock available for the public to trade excluding the locked-in shares which are owned by promoters and connected persons). Then, what is the meaning of weightage in Nifty? Whenever we talk about nifty weightage, then it's about the nifty stock weightage based on the stocks that are not under control of any particular company’s promoters. Methodology : Free Float Market Capitalization.The primary characteristics of Nifty 50 are: It offers investment managers exposure to multiple sectors in one basket in the Indian market. It is also one of the most actively traded contracts all over the world. This index is shown to be the largest single financial product in India with a system of providing a benchmark to exchange-traded funds (onshore and offshore), futures and options abroad at the SGX. After 26 June 2009, it was computed on the basis of free float methodology. ![]() The Nifty 50 is a well-diversified portfolio of 50 blue chip companies in India spread across 14 sectors of the economy. The Nifty 50 companies' weightage in the index are decided on the basis of free float market capitalization method. These indexes are important because their performance in the market will depict the performance of the Indian economy. It is one of the two main stock indices used in India, the other being Sensex which is the index of BSE which consists of a portfolio of top 30 companies in India. Nifty 50 is the index of a National Stock Exchange which consists of a portfolio of top 50 companies in India.
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