What is Nifty 50 & how is it calculated ?

The Nifty 50 is a stock market index in India that represents the performance of 50 of the largest and most liquid companies listed on the National Stock Exchange (NSE). It gives you a quick snapshot of how the market is doing.

Here’s a simple explanation of how the Nifty 50 is calculated:

🧮 Nifty 50 Calculation Formula

The Nifty 50 is calculated using the free-float market capitalization weighted method. That sounds complicated, but let’s break it down.

Formula:

Nifty 50 Index = (Current Market Value of 50 Companies / Base Market Capital) × Base Index Value

Key Terms Explained:

🔹 1. Free-Float Market Capitalization

• It’s not the total value of a company’s shares.
• It only includes the shares that are available for the public to trade (excluding shares held by promoters, government, etc.).

Formula:

Free-Float Market Cap = Share Price × Number of Publicly Available Shares

🔹 2. Base Market Capital

• This is a fixed value from the day Nifty was launched (November 3, 1995).
• It’s used to keep the index comparable over time.
• Base index value Current Market Value / (1000 * Base Market Capital).

Example :

Let’s say the total free-float market cap of the 50 companies today is ₹70,00,000 crore.

And the base market cap in 1995 was ₹1,00,000 crore.

Nifty 50 = (70,00,000 / 1,00,000) × 1000 = 70,000

So, the Nifty would be at 70,000.

(Note: This is just an example; actual values vary daily.)