Nifty 50 is a well-diversified top 50 companies index reflecting overall market conditions listed on the National Stock Exchange (NSE).
The Nifty 50 index was launched in 1996 with the idea of providing investors with a benchmark for measuring the performance of the Indian stock market.
Nifty 50 includes financially sound companies like Reliance, HDFC, Infosys, and TCS from 14 different sectors. Stocks are chosen based on various criteria, including market capitalization, liquidity, trading frequency, and sectoral representation.
List of sectors in Nifty 50
Nifty 50 includes stocks from 14 different sectors to ensure that the index represents the overall performance of the Indian economy.
| Sector | Weightage |
| Financial Services | 37.40% |
| Information Technology | 14.72% |
| Oil, Gas & Consumable Fuels | 12.27% |
| Fast Moving Consumer Goods | 9.35% |
| Automobile and Auto Components | 5.60% |
| Metals & Mining | 3.17% |
| Healthcare | 3.74% |
| Consumer Durables | 2.97% |
| Construction | 3.34% |
| Telecommunication | 2.43% |
| Power | 2.06% |
| Construction Materials | 1.87% |
| Services | 0.59% |
| Chemicals | 0.48% |
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List of Stocks Weightage in Nifty 50
Each stock in the nifty 50 has a different weightage in the index. The weightage of a stock in Nifty 50 is determined by its free-float market capitalization. Free-float market capitalization means the total market value of a company’s shares that are available for trading in the market. The larger the free float market cap the, higher will be the weightage.
For example, XYZ company has 1,00,000 free float shares outstanding in the market. The current stock price is Rs 1,000.
The free-float market cap of XYZ will be 1,00,000*1,000 = Rs 10,00,00,000.
In NSE nifty 50 Reliance has the largest weightage of 10.50% in the index because they have the highest free float market capitalization of Rs 7,92,05,274.33 lakh.
Taking another example, the market capitalization of Infosys is just half that of TCS but has a higher weighting in the Nifty 50 as compared to TCS because of the free float market capitalization.
72% of the total TCS stock is owned by their promoters and very few free-float stocks are available in the market.
As of 31st March, the top 10 companies with their respective weightages are
| Company | Sector | Weightage |
| Reliance Industries Ltd | Oil, Gas & Consumable Fuels | 10.34% |
| HDFC Bank Ltd | Financial Services | 9.31% |
| ICICI Bank Ltd | Financial Services | 8.04% |
| Infosys Ltd. | Information Technology | 6.68% |
| Housing Development Finance Corporation Limited | Financial Services | 6.24% |
| ITC Ltd | FMCG | 4.44% |
| Tata Consultancy Services Ltd | Information Technology | 4.31% |
| Larsen & Toubro Ltd | Construction | 3.43 |
| Kotak Mahindra Bank Ltd | Financial Services | 3.34% |
| Axis Bank Ltd | Financial Services | 3.08% |
These top 10 stocks represent almost 56% of the total weightage of Nifty 50. The other 40 stocks also have their respective weightage, but their contribution to the index is relatively less.
There are 4 criteria set by the NSE’s three-tier governance structure which includes the Board of Directors of NSE Indices Limited, the Index Advisory Committee (Equity), and the Index Maintenance Sub-Committee.
Nifty 50 Past Performance
Since June 30, 1999, the Nifty 50 has given annualized total returns (TR) of 14.2% CAGR assuming dividends are reinvested in the index. The Nifty 50 TR index has returned 11.8% CAGR, 17.6% CAGR, and 4.23% CAGR over the last 15 years, 5 years, and 1 year respectively.
How to Invest in Nifty 50
Likewise invest in bank nifty, you cannot directly invest in the Nifty 50 but you can invest in Nifty 50 through Index funds, ETF, or direct equity.
You can choose the method depending on your investment goals, risk appetite, and financial situation. Let’s discuss each of them
#1. Index Funds
Nifty 50 Index funds are mutual funds that track the performance of this Nifty fifty index.
You can invest in Nifty 50 Index funds to have a diversified portfolio of large-cap Indian stocks. You don’t need expertise or resources to pick individual stocks.
Nifty 50 Index funds offer several benefits, such as low fees, high liquidity, and ease of trading. As these funds are passively managed, they have lower expense ratios compared to actively managed funds.
Top 5 Nifty 50 Index Funds in India at present are –
- Tata Nifty 50 Index Fund -Direct Plan
- UTI Nifty 50 Index Fund
- Nippon India Index Fund – Nifty 50 Plan
- ICICI Prudential Nifty 50 Index Fund
- BANDHAN Nifty 50 Index Fund
You can check the list of best Index funds in India based on their past performance.
Pros of Investing in Nifty 50 Index Funds
- Index funds provide exposure to a diversified portfolio of Nifty 50 stocks, which reduces the risk of concentrated exposure to individual stocks.
- They are passively managed, which reduces the fees and expenses associated with the fund.
- Easy to invest in and require minimal research and analysis.
Cons of Investing in Nifty50 Index Funds
- Index funds may not provide higher returns than the market as they aim to match the performance of the index, rather than outperform it.
- Index funds are not suitable for you if you o want to have control over the stocks.
#2. Exchange-Traded Funds (ETFs)
Nifty 50 ETFs are similar to mutual funds, but trade like stocks on an exchange.
You can buy and sell fund ETFs throughout the trading day through your Trading account. ETFs also have lower expense ratios compared to actively managed funds.
Most Popular 5 ETFs in India are
- UTI Nifty 50 Index Fund – Direct Plan-Growth
- HDFC Index Fund – Direct Plan – Nifty 50 Plan
- ICICI Prudential Nifty 50 Index Fund – Direct Plan-Growth
- Bandhan Nifty 50 Index Fund – Direct Plan-Growth
- Nippon India ETF Nifty 50 BeES
Pros of Investing in ETFs
- They are passively managed, which means the fund manager does not actively buy or sell stocks, which reduces the fees and expenses associated with the fund.
- They are traded on the stock exchange, which means you can buy and sell them like individual stocks.
Cons of Investing in ETFs
- They may not be suitable for investors who want to have control over the stocks they own.
- They may be affected by market conditions, such as liquidity and trading volumes, which can affect their prices.
I have explained the step-by-step process to invest in Niftybees. You can follow the same process to invest in the other Nifty 50 ETFs.
#3. Direct Equity Investment
You can buy the individual stocks included in the nifty 50 in the same ratio. This approach requires some research and analysis of individual stocks and carries higher risk due to concentrated exposure to a few stocks. It is suitable for investors who have the knowledge and experience to select and manage their stock portfolio.
On the practical ground, investing in direct equity in the same ratio of Nifty 50 is hard. The biggest reason is that you cannot buy the stocks in a fraction or you would need a higher investment to invest in Individual stocks to keep the ratio the same.
Pros of investing in stocks
- You can get higher returns than other investment vehicles if you invest in the right companies.
- You have control over the stocks you own and can make decisions based on your investment objectives and risk appetite.
- You can take advantage of short-term price fluctuations to make profits.
Cons of investing in stocks
- Requires research, analysis, and due diligence to identify the right companies to invest in.
- It can be risky and volatile as the stock prices can be affected by various factors such as market conditions, company performance, and global events.
- It can be time-consuming and requires active management and monitoring of the stocks you own.
You would like to read the step-by-step guide on how to invest in sensex.
Conclusion
You should invest in Nifty 50 only if you don’t have the knowledge or resource to analyze the stocks and you want the same return as of Nifty 50 index.
If you the how to analyze the stocks for long-term investment then you can definitely beat the nifty 50 return.
FAQs
You can track the performance of Nifty 50 on the NSE website, financial news portals, or through your broker’s trading platform.
Yes, NRIs can invest in Nifty 50 through the Portfolio Investment Scheme (PIS) route, subject to certain regulations and restrictions.
Investing in Nifty 50 involves market risks, volatility, and company-specific risks. The index’s performance can be affected by various factors such as economic indicators, political events, and global market trends.
Investing in Nifty 50 involves market risks, volatility, and company-specific risks. The index’s performance can be affected by various factors such as economic indicators, political events, and global market trends.
The minimum investment required to invest in the Nifty 50 varies depending on the investment option you choose. For example, mutual funds may have a minimum investment requirement of Rs. 500, while ETFs may require a minimum investment of one unit.
Yes, you can invest in the Nifty 50 using a SIP, which allows you to invest a fixed amount at regular intervals.
The investment horizon for Nifty 50 investments depends on your investment goals and risk tolerance. It is important to have a long-term investment horizon to benefit from the potential growth of the Indian economy.
Yes, you can invest in the Nifty 50 directly by buying individual stocks that are part of the index. However, this requires expertise and research.
Yes, many brokerage firms offer mobile apps that allow you to invest in the Nifty 50.
Investing in the Nifty 50 comes with risks, but it can be a safe investment option if you do your research, consult with a financial advisor, and have a long-term investment horizon.
You can open a brokerage account by contacting a brokerage firm and providing the required documents and information.
Yes, you can invest in the Nifty 50 with a small amount of money by choosing an investment option that allows you to invest a small amount at regular intervals, such as a SIP.
