The NIFTY 50, a benchmark index for the Indian stock market, is calculated using a free-float market capitalization-weighted method. Here’s a simple way to understand how it’s done:
- Free-Float Market Capitalization: This represents the market value of the shares that are available for trading by the public, excluding promoter holdings and other restricted shares.
- Index Value Calculation:
- Calculate the Market Capitalization for each company in the NIFTY 50:
Market Capitalization = Number of Shares × Current Market Price
- Calculate the Free-Float Market Capitalization for each company:
Free-Float Market Capitalization = Market Capitalization × Free-Float Factor
- Sum the Free-Float Market Capitalization of all 50 companies to get the total free-float market capitalization.
- Base Market Capitalization: This is the total market capitalization of the index at the base date, which is a fixed historical point in time.
- NIFTY 50 Index Value:
NIFTY 50 Index Value = Current Total Free-Float Market Capitalization / Base Market Capitalization × Base Index Value
The base index value is typically set at 1000 for convenience, and the base market capitalization is the total market value of the index constituents on the base date.
Example Calculation
- Suppose the base date market capitalization of NIFTY 50 is ₹1,00,000 crores.
- The current free-float market capitalization is ₹2,00,000 crores.
Then the NIFTY 50 index value would be:
NIFTY 50 Index Value= (2,00,000 crores / 1,00,000 crores) ×1000 =2000
This index value indicates how the market has performed relative to the base date.
2 comments
Bhavesh parmar
August 3, 2024 at 9:17 am
Is there any strategy to pick perticular script when it should by?
Also want to know about to pick stock strick price call/put.
YouTube Downloader
September 12, 2024 at 4:27 pm
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