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CALCULATION OF NIFTY

NSE NIFTY index statistics, Calculation Methodology and History


Nifty Data Name of the Exchange Base Year Base Value Base capital Definition - Explanation National Stock Exchange November 3, 1995 1000 Base capital of Rs 2.06 trillion calculated using market capitalization weighted method, wherein the level of the index reflects the total market value of all the index stocks in the index relative to a particular base period of Nifty. 50

Method of calculation

Number of scrips

Index calculation frequency


Index calculation and Maintenance

Real Time, During trading hours.


Managed by India Index Services and Products Ltd. (IISL), a joint venture between NSE and CRISIL

ABOUT NIFTY NSE Nifty Index Story S&P CNX Nifty is a well diversified fifty stock index accounting for 24 sectors of the Indian economy. S&P CNX Nifty is owned and managed by India Index Services and Products Limited (IISL). Which is a joint venture between National Stock Exchange (NSE) and Credit Rating and Information Services of India Ltd (CRISIL). IISL is India's First Company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard and Poor (S&P), who are world leaders in index services. The total traded value of all Nifty stocks is 50% (approximately) of the traded value of all stocks listed on the NSE.

The NSE S&P CNX Nifty 50 index is a well diversified 50 stock index accounting for 24 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds

NSE S&P CNX Nifty 50 is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focussed upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.

Free Float Market Capitalization is defined as the value of all the shares available for public trading excluding the promoter equity, holdings through FDI Route, Holdings by private corporate, and holdings by Employee Welfare Funds.

Why Free Flow Market Cap? 1. It depicts the market more rationally 2. It removes undue influence of government or promoter share holding, there by giving the equal opportunity for companies to be in the SENSEX 3. Almost all the Indices world over are calculated by this methodology 4. It gives Fund managers more authentic information for benchmark comparisons.

NSE Nifty Calculation Methodology NSE Nifty Calculation is computed using market capitalization weighted method. The level of the Nse Nifty index reflects the total market value of all the 50 stocks in the index relative to base period. The NIFTY Calculation Methodology takes into account relevant changes in the index and particularly corporate actions such as Bonus, Stock Splits, Rights issue, etc.

Real time computation of Nifty During trading hours, value of the Index is calculated automatically on real time basis. This is done automatically on the basis of on-line prices at which trades in Index constituents are executed.

Nifty Index Management Nifty is managed by a professional team of IISL, a joint venture firm setup by NSE and CRISIL with technical assistance from Standard and Poor. There is a three-tier governance structure comprising the board of directors, Index Policy Committee and the Index Maintenance Subcommittee.

Nifty Index Futures NSE commenced trading in Index Futures on June 12, 2000. The Nifty futures contracts are based on the popular market benchmark S and P CNX Nifty Index. CNX Nifty is calculated using NSE prices, and NSE is the most liquid stock exchange in India, making it easier to do arbitrage for S&P CNX Nifty index futures.

Nifty scrip selection criteria 1. Liquidity (Impact Cost) : For inclusion in the index, the security should have traded at an average impact cost of 0.50% or less during the last six months for 90% of the observations for a basket size of Rs. 2 Crores. Impact cost is cost of executing a transaction in a security in proportion to the weightage of its market capitalisation as against the index market capitalisation at any point of time. This is the percentage mark up suffered while buying / selling the desired quantity of a security compared to its ideal price (best buy + best sell) / 2.

2. Floating Stock : Companies eligible for inclusion in S&P CNX Nifty should have atleast 10% floating stock. Floating stock shall mean stocks which are not held by the promoters and associated entities of such companies. 3. IPO New scrips : A company which comes out with a IPO will be eligible for inclusion in the index, if it fulfills the normal eligibility criteria for the index like impact cost, market capitalisation and floating stock, for a 3 month period instead of a 6 month period.

4. Corporate actions : Compulsory changes like corporate actions, the stock having largest market capitalization and satisfying other requirements related to liquidity, turnover and free float will be considered for inclusion. 5. Replacement Frequency : The stock with the highest market capitalization in the replacement pool has at least twice the market capitalization of the index stock with the lowest market capitalization, it is normal process automatically.

6.Track Record : companies should have good track record.

NSE NIFTY index milestones / records


Date of Milestone 11-December-2007 27-September-2007 01-December-2006 30-January-2006 09-January-2004 09-March-1992 Nifty Index Value (points) 6000 5000 4000 3000 2000 1000

NSE NIFTY index companies and Industry / Sector


Name of Company ACC Ltd Ambuja Cements Axis Bank Bajaj Auto BHEL BPCL Bharti Airtel Cairn India Cipla DLF Industry / Sector Cement Cement Banks Automobiles Electrical Refinery Telecom Oil exploration Pharmaceutical Construction

NSE Nifty biggest falls / crashes


Date of Nifty Crash 21-January-2008 22-January-2008 18-May-2006 17-December-2007 Points down 496 310 496 271

How Nifty is calculated?


The formula for calculating the Nifty= (Sum of free flow market cap of 50 benchmark stocks)*Index Factor Index Factor = 1000/Market Cap Value in 1995. Where, 1000 is the Index value during 1995.

Market Capitalization is the total worth of the outstanding (issued ) shares of the company it represents the total worth of the company Market Capitalization = Share Price * Total Shares

Example : ICICI bank issued 1000 shares out of which 200 shares are with govt,500 shares by director of the company and remaining 300 shares are available in the open market for trading & market price is Rs.10 Here total market cap 1000*10=10,000. Free float market cap 300*10=3000.

In calculation of nifty (same method is used) Sum up all 50 shares floated market cap*1000/market cap in 1995. Let ICICI, Bharti Airtel are having free float market cap of 3000, 7000 According to formula

(7000+3000)*1000/market cap in 1995

Assume that market capitalization in 1995 be 20000


Then,

(10,000)1000/20000=500
Index value is 500.

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