Category Archive : Stock Market Concepts

BSE Sensex Reconstitution

Sensex Reconstitution | 3 Entries & 3 Exits

What Changes Made in Sensex Reconstitution / Re-balancing?

Introduction

As part of Sensex reconstitution exercise, Asia Index recently announced some changes in BSE Sensex. There are 3 new entries and 3 exits in BSE Sensex effective from December 23, 2019. Lets see which are those companies entering and leaving BSE Sensex?

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

Sensex Reconstitution| 3 Entries & 3 Exits

Announcement of Reconstitution Results of BSE Sensex

  • Asia Index has announced the reconstitution results of major benchmark indices on 22nd November. The changes are effective at the open of Monday, December 23, 2019. According to the results, there are 3 companies entering and 3 companies are exiting in BSE Sensex.
  • Asia Index Pvt. Ltd is a 50-50 partnership between :
    • S&P Dow Jones Indices LLC, the world’s largest provider of financial market indices and
    • BSE Ltd, Asia’s oldest stock exchange and home to the iconic SENSEX index – a leading indicator of Indian equity market performance.
  • According to the results announced by Asia Index,
    • 3 Entries : Nestle India, Titan Company, Ultra Tech Cement
    • 3 Exits : Tata Motors (with Tata Motors DVR), Vedanta Ltd, Yes Bank
BSE Sensex Reconstitution - 3 Entries & 3 Exits
Sensex Reconstitution – 3 Entries & 3 Exits

3 Entries

Nestle India

  • Th stock has given the returns of around 41% over the 6 months period from 1st May to 31st October. Along with the consistent top-line as well as bottom-line growth, the PE ratio of Nestle was consistently rising. The stock has shown a continuous growth in its market cap in spite of having a premium valuation.
  • Average disposable income of Indians is in an upward spiral. It offers an advantage to the companies like Nestle as more disposable income means more consumer spending which in turn means more revenue for sectors like FMCG and Consumer Durables.
  • Thus, Nestle India is enjoying a premium valuation on account of its strong fundamentals and decent future prospects. Nestle has qualified for the inclusion in BSE Sensex on account of the required criteria like float adjusted and total market cap and being a part of BSE 100.

Titan Company

  • It has grown around 17% with respect to the market cap from 1st May to 31st October. Being a consumer durable product company, the stock has shown a good sales numbers in Q4 FY19 as well as Q1 FY20
  • Due to the cascading effect of the revenue on the operating profit and its margins %, net profits have also given steady growth in the same period.
  • Thus the market cap of the Titan grew on a good top-line and bottom-line effect. On account of the premium valuation, the market cap has shown a steady rising trend. Thus, entered in BSE Sensex.

UltraTech Cement

  • It may be surprising that how can UltraTech Cement has made an entry in the BSE Sensex in spite of giving negative performance since last 6-8 months. The stock has given -10% returns from 1st May to 31st October.
  • However, free float market cap of the company is increased on account of a slight decrease in promoter’s holding by 0.5%. So, according to the float-adjusted market cap calculation, UltraTech Cement has entered into the BSE Sensex.

3 Exits

Tata Motors (with Tata Motors DVR)

  • On account of a continuous slump going on in the Automobile Industry, Tata Motors stock is beaten down greatly over last 12 months.
  • Because of the same reason the average market capitalization of Tata Motors has deteriorated adversely. The stock returns was -17.5% from last 6 months (1st May – 31st October). Recently the stock made a rebound slightly and on a recovery phase after Q2 FY20 results. However, the average market cap over the 6 months period was the key factor for exit call from BSE Sensex.
  • The 6 month period (1st May – 31st October) is taken as a basis for evaluating the stocks for BSE Sensex re-balancing effective from 4th Monday of December.

Vedanta Ltd

  • Over the period from 1st May to 31st October, Vedanta Ltd has given a negative performance of almost 21%.
  • The stock has gone through a series of fall every time almost 4-5%.Thus, as a consolidated effect its market cap get impacted and the stock was not able to qualify the evaluating criteria required for BSE Sensex inclusion.
  • In the last re-balancing of exercise held in June 2019, Vedanta Ltd was added to the BSE Sensex. But, in December-2019, it got the exit from the index.

Yes Bank

  • Stock is almost 70% down over the 6 months period. Yes bank has underperformed on account of a number of reasons like huge NPA numbers in Q4 FY19 and Q1 FY20 results, thereby incurring big losses.
  • Promoters stake sale by Mr.Rana Kapoor also imposed a negative impact on the bank.Thus, market cap has dropped continuously over the 6 months time.
  • In the last re-balancing of exercise held in June 2019, along with Vedanta Ltd, Yes Bank was also added to the BSE Sensex. But, now, it got the exit from the index.
Precautions to be Taken by Investors after Karvy Fraud

Precautions Investors Should Take After Karvy Stock Broking Fraud

What is Karvy Stock Broking Fraud?

Introduction

In this article, we will see what precautions the retail investors should take after Karvy Stock Broking Fraud worth of Rs.2000 Cr and the details of fraud. On Friday, 22nd November 2019, SEBI (Security and Exchange Board of India) banned Karvy Stock Broking Ltd (KSBL) over client defaults worth Rs.2,000 Cr. SEBI banned Karvy from taking on new clients and executing trades for existing customers.

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

What Precautions Investors Should Take After Karvy Stock Broking Fraud?

What is Karvy Stock Broking Fraud?

Karvy Stock Broking is one of the largest brokers in India in terms of clients accounts. According to the data released by NSE, Karvy had around 2.5 Lakh clients as on October 31, 2019.

Investors complained to government as Karvy delays broking payouts
  • Earlier this year, concerns are being raised about the financial problems at Karvy Stock Broking. Several investors had complained that payouts by the broking firm were being delayed.
  • Investors across the country have complained to the Prime Minister’s Office (PMO), Finance Ministry and SEBI, seeking their payouts. 
  • It was clearly suggesting that Karvy was facing a liquidity crunch and was unable to make payments to its clients.
  • NSE had also received complaints from investors about irregularities by Karvy relating to their demat accounts.
What Karvy Did?
  1. Karvy Stock Broking pulled out shares from its clients’ demat account which were inactive.
  2. It transferred those shares to the demat account controlled by it (Karvy).
  3. Then it pledged those shares with banks and raised funds.
  4. Karvy then transferred these funds/money to its Real Estate arm, named Karvy Realty.
  5. However, Karvy failed to return those shares to its clients from whose demat accounts it had pooled the shares at the beginning.
Details of Charges & Actions against Karvy Stock Broking
  • Charges :
    • NSE reported that Karvy misused the Power of Attorney given by its clients. It sold client securities in the market via entities it controls and thus used the funds for its own purposes.
  • Actions :
    • NSE has appointed a forensic audit of Karvy Stock Broking’s books to investigate the extent of misuse of clients’ demat account for its own purposes.
    • SEBI banned Karvy Stock Broking from taking on new clients and executing trades for existing customers.
    • Depositories – NSDL and CDSL are asked not to act upon instructions by Karvy on the basis of Power of Attorney (PoA).
    • Also, Depositories asked to monitor the movement of securities into and from depository participant accounts of Karvy’s clients.
    • Thus, SEBI had directed Exchanges and Depositories to initiate disciplinary actions against Karvy.

What Precautions the Retail Investors Should Take?

What Precautions Investors Should Take After Karvy Stock Broking Fraud?
Precautions Investors Should Take After Karvy Stock Broking Fraud

As a safety measure we suggest that if you have an account in Karvy Stock Broking and if you have not operated it over a long time, then you should visit that franchise of Karvy. You should check if everything is right there with regards to your account.

Lets see the key precautions the investors should take :

1. Check NSDL/CSDL statement every month
  • The monthly statement of NSDL and CSDL contains the details of your orders and other transaction details regarding that particular month.
  • NSDL and CSDL asked to send the monthly statement to the clients wherever client’s PAN number is registered such as demat account, mutual fund account etc. One can get all the details of the month in this monthly statement from NSDL or CSDL around 8th-10th day of every month.
  • So, you should check and verify the details of the shares in your account every month. It is very important, so one should never ignore it.
2. Don’t let your account to become dormant
  • Even if you are looking for the long term investment, still you should never let your account to become dormant.
  • Keep your accounts active to get the statement regularly. Brokerages can target dormant accounts, if the clients are not paying attention to their accounts.
3. Opt for depository services at big PSU or private banks
  • One can opt for depository services at PSU or private banks as a safety step since these banks are very well regulated.
  • If you have idle funds lying in your Karvy brokerage account, you can transfer these to your own bank account.
  • You can keep trading account anywhere you want, but try to open depository accounts at banks as a safeguard.
4. Understand the pros and cons of giving Power of Attorney to brokers
  • You should thoroughly understand the pros and cons of giving Power of Attorney to brokers.
  • Offering power of Attorney means you are offering the rights of transaction, share transfer to your broker. So you should be well versed with the consequences of it beforehand.
  • In today’s busy schedule, on account of convenience basis, clients many a times offer Power of Attorney to brokers blindly. Here many important things can be missed out by the clients because of their ignorance.
  • So, one should analyse the trade-off – convenience vs associated risk before offering the Power of Attorney to brokers.
Quality vs Valuation

Quality Vs Valuation Relationship Explained With Example

4 High Quality Premium Valuation Stocks

Introduction

In this article, Quality vs Valuation relationship is explained with example. Analysis of 4 High Quality Premium Valuation Stocks is done. Does valuation of a quality stock really affect its returns in long run? Should you refrain yourself from buying quality stocks at premium valuations? To answer the above questions we look into the numbers of few quality stocks and analyse the significance of valuation parameters.

Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

Quality Vs Valuation Relationship Explained

4 High Quality Premium Valuation Stocks

A Lesson in Value Investing
  • Benjamin Graham, the Dean of Wall Street built a great fortune by following his own advice on Value Investing – ”Invest in low-priced, solidly run companies with good dividends.”
  • Warren Buffett is a also great role model for value investors. Over the years Buffett moved towards buying high-quality businesses and did not hesitate to pay up for quality time and again and again.
  • The term ‘value investing’ is widely used to imply the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield
  • The bottom line is – Pay up for quality, but don’t overpay. If the fundamental performance of the stock justifies its subsequent upward re-rating, then the idea of paying up for quality makes great economic sense, as Buffett figured out.

Quality Vs Valuation Relationship Explained

  • High valuation comes hand in hand with the quality stocks or quality businesses. There are 2 scenarios of high valuation :
    1. Overvaluation
    2. Premium Valuation
  • In case of overvaluation, the stock can’t remain overvalued or can’t sustain higher valuation for a long time. It will go through a correction phase cyclically after sometime and same trend can be repeated in the long term.
  • On the other hand, if the stock is trading at a premium valuation, then the stock go through a cycle of re-rating of PE ratio (Price to Earnings Ratio). It means its PE ratio is re-rated upwards ie. increases after a certain period of time.
  • As far as quality vs valuation relationship of a stock is concerned :
    • Does valuation of a quality stock really affect its returns in long run?
    • Should you refrain yourself from buying quality stocks at premium valuations?
  • To answer the above questions we look into the numbers of few quality stocks and analyse the significance of valuation parameters.

Let see which are those 4 High Quality Premium Valuation Stocks.

4 High Quality Premium Valuation Stocks

Nestle India
Nestle India – Price Movement & PE Ratio
Nestle India – Price Movement & PE Ratio
  • Nestle has been in India for over a century and has grown along with the growth in the Indian economy.
  • Average disposable income of Indians is in an upward spiral. It offers an advantage to the companies like Nestle as more disposable income means more consumer spending which in turn means more revenue for sectors like FMCG and Consumer Durables.
  • Compounded Annual Growth (CAGR) of Sales, Profit and Share Price over the last 10 years are as follows :
    • Sales Growth 10-years CAGR = 10.07%
    • Profit Growth 10-years CAGR = 11.61%
    • Share Price Appreciation 10-years CAGR = 18.61%
  • Along with the consistent top-line as well as bottom-line growth, the PE ratio of Nestle was consistently rising from 2009 till 2015 to almost 99.7 (Refer the above chart). After the issues with company’s flagship brand Maggi, the PE ratio came down drastically in 2016 to 58.06. Still the ratio was sustained around 50+ range. And then the valuation again started rising continuously as on today.
  • This clearly indicates that Nestle India is enjoying a premium valuation on account of its strong fundamentals and decent future prospects.
Asian Paints
Asian Paints – Price Movement & PE Ratio
Asian Paints – Price Movement & PE Ratio
  • Since 1967, Asian Paints has been a leader in Indian paint Industry. It is an undisputed king in the sector with more than 50% market share. The company is having very strong brand penetration across its target market.
  • Compounded Annual Growth (CAGR) of Sales, Profit and Share Price over the last 10 years are as follows :
    • Sales Growth 10-years CAGR = 13.91%
    • Profit Growth 10-years CAGR = 18.44%
    • Share Price Appreciation 10-years CAGR = 26.82%
  • Thus it is evident that the appreciation in share price of the company is a reflection of its sales and profit growth.
  • Many a times inexperienced value investors gives much attention in buying stocks when at very low P/E multiples. Successful investors value quality over ratios.
  • In 2015 PE of the stock rose by 35% to 55.6. The stock has almost always sold at a premium valuation. An investor who paid up for quality and bought the stock at PE 55 times earnings in 2015 still did very well. Because its premium valuation has been sustained as it is trading at 66 in 2019.
  • Thus, Asian paints remains to be an attractive stock irrespective of its all- time premium valuations.
Pidilite Industries
Pidilite Industries – Price Movement & PE Ratio
Pidilite Industries – Price Movement & PE Ratio
  • Since its inception in 1959, Pidilite Industries has been a pioneer in consumer and specialities chemicals in India. The company is having a diverse and ever-evolving product portfolio including – adhesives, sealants, waterproofing solutions and construction chemicals, industrial resins, polymers etc.
  • Over the last 60 years, Pidilite is having virtually no competition from its peers. Its flagship brand – Fevicol is enjoying a strong monopoly in the segment.
  • Compounded Annual Growth (CAGR) of Sales, Profit and Share Price over the last 10 years are as follows :
  • Sales Growth 10-years CAGR = 13.55%
  • Profit Growth 10-years CAGR = 23.75%
  • Share Price Appreciation 10-years CAGR = 31.26%
  • There has been a consistent rise in the valuation of the company over last 10 years and currently it is enjoying a premium valuation. Thus, Paying up for quality paid off very well for Pidilite’s long-term investors.
HDFC Bank
HDFC Bank - Price Movement & PE Ratio
HDFC Bank – Price Movement & PE Ratio
  • The bank is engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations. With a sequential growth of its retail banking , the
  • HDFC Bank is another name of the consistency in delivering the performance.
  • Compounded Annual Growth (CAGR) of Sales, Profit and Share Price over the last 10 years are as follows :
  • Sales Growth 10-years CAGR = 20.48%
  • Profit Growth 10-years CAGR = 25.82%
  • Share Price Appreciation 10-years CAGR = 31.98%
  • Although lending in India has increased tremendously in the past decade on the grounds of faster loan approvals, India is still way behind developed economies.
  • However, enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide impetus to growth.
  • All these factors suggest that India’s banking sector is assured for robust growth. The rapidly growing business would turn to banks for their credit needs.

Conclusion

  • If a company has good fundamentals and decent future prospects, valuation does not play an imminent role in deciding returns of stock in long term.
  • India has a class of high-quality businesses that will continue to prosper on account of the demographic position of the country.
  • Regardless of the growth delivered over the last few decades, these businesses are still nowhere near saturation.
  • Thus, paying up for these quality businesses, but not overpaying for them, should work out very well for long-term value investors.
  • So, one should stop associating value investing with low P/E multiples. Now its a time to move towards buying high-quality businesses. One should not hesitate to pay up for quality.
Bull Markets in India

What is a Bull Market? | 5 Bull Runs in India

Understanding Bull Markets in India

Introduction

In this article, we are going to discuss the 5 Bull runs in India. What is a bull market, in which period and scenarios these bull runs happened in India etc.

What is a Bull Market?

  • The term “bull market” refers to a time or a period when the stocks are on an upward trend. It is derived from the term “bullish”. In this case Bullish is a metaphor for charging or moving forward.
  • It is important for us to understand what a bull run signifies and what are its micro and macro-economic implications.
    • In a bullish market, sentiments of investors are high. The small and mid-cap companies tend to take the maximum advantage of this optimism.
    • There is increased cash flow in the market and hence the companies expand and grow at an accelerated pace.
    • Apart from the growth of individual companies and the market itself, the economy of the nation also improves which is reflected by increased GDP growth.

Which are these 5 Bull Runs in India?

India, being a developing economy, has witnessed several bullish periods since independence. Indian bull runs, on an average, have lasted for 32 months with the longest and slowest one being the most recent one.       

To better understand a “Bull Run” we must now look at the history of few bull markets in India.

Bull Markets in India
5 Bull Markets in India
1985-86
  • The first one being the one in 1985-86. The bull market of 1985 began with Rajiv Gandhi becoming the youngest Prime Minister of India after the unfortunate assassination of his mother and former Prime Minister Indira Gandhi. The death of Indira Gandhi shook the entire nation. Aftermath of the incident resulted into a triumphant victory for the Indian National Congress. Hence started the new age of Indian Politics.
  • Market was, correspondingly, filled with optimism under the able and charismatic Finance Minister V.P. Singh. V.P Singh laid out a cognizant reform for long term fiscal policy and rationalization of excise duties.
  • Further, Rajiv Gandhi gave subsidies to corporate companies in order to increase Industrial Production which triggered dramatic growth in economy and consequently the markets witnessed new highs. Rajiv Gandhi was also instrumental in bringing about the IT and Telecom Revolution. With prolific reforms from the new government, market surged from 230 to 670 levels, a growth of nearly 3 folds, in a time frame of less than 2 years.
  • The bull run came to an end with the disclosure of Bofors scam in 1987 which shook the nation’s confidence and brought down the market in correction.
1991-92
  • The country, however, did not wait for long to see another “bull market” which is infamously known as the Harshad Mehta Bull Market. This bull run started in the year 1991 which was again ignited by the formation of new government when INC (Indian National Congress) returned to power by overthrowing the then ruling coalition government of Janata Dal, BJP and other Left parties.
  • Dr. Manmohan Singh became the Finance Minister under the Prime Ministership of PV Narsimha Rao. The historic budget of 1991 proved decisive and path-breaking for Indian economy and thus triggered the skyrocketing uptrend of Indian Stock Market. SENSEX shot up by around 300% in less than 18 months.
  • The magnitude of this uptrend was such that it would result in negative equity return for a decade. Unfortunately, this rally was fuelled by the notorious mastermind Harshad Mehta a.k.a the “The Big Bull”.
  • B. Com graduate, Harshad Mehta started his career as a salesperson in New Age India Assurance Company Ltd. During this time, he got attracted towards the Share Market and soon worked his way up to be named as the “Amitabh Bachchan of Stock Market”.
  • In his scam, Harshad Mehta exploited the loopholes in Banking System by forging fake bank receipts in Ready Forward Deals. In short, Mehta used to illegally raise cash from Ready Forward deals and invest it in Share Market.  The reputation of Mehta was such that he manipulated the entire stock market according to his will and manged to hike the demand of certain shares like ACC, Sterlite and Videocon.
  • This resulted in stocks like ACC (Associated Cement Company) to jump from Rs. 200 to Rs. 9000 within 3 months. The stock markets were overheated, and the ‘bulls’ were on a mad run.  
  • In the end, Mehta sold off majority of his stocks in order to book profits which irrefutably crashed the market. By 1994, the market came down to almost 30% of the 1992 peak value.
Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya
1998-2000
  • The dawn of Internet in 1998 marked the next bull cycle in India. While the US was amidst the dot com bubble, Asia was under the Y2K scare (a bug which was expected to afflict Computer Systems in the year 2000).
  • However, India was not daunted by this and took this opportunity to foray into global software markets by providing debugging services. Thus, began the rally of IT stocks in share market.
  • Within 2 years, BSE IT Index gained over 1000%. More than 30% of SENSEX was now made up of IT companies. All this resulted into overvaluation of IT stocks and thus the market started correcting in 2000. During this period (1998-2000), SENSEX rose from 2,700 to almost 6000.
2003-2008
  • The next Bull Cycle began in the summer of 2003 which was brought by the Infrastructure and global Liquidity. After the dot-com bubble burst in US and Y2K incident in Asia, the global markets, including Indian, had corrected to considerable proportions.
  • Sentiments of investors had now started to restore all across the globe. A significant characteristic of this Bull run, which made it distinct from the previous bull runs, was that it was not India-specific.
  • Many other countries like China and Brazil also climbed to all time highs in this period. US on the hand was witnessing a boom in realty sector which resulted into it being submerged in subprime mortgages.
  • Banking sector of US was eventually exposed in 2008 with the collapse of Lehman Brothers. Consequently, Wall Street crashed, and its impact rippled all across the world. As a result, the Indian Markets fell on several occasions in 2008.
  • From peak levels of 20,000, SENSEX came down to 8,000. Thus, marked the end of another Bull Run.
2013-2018
  • The bull run of 2013-18 is considered as the longest bull run in Indian history. Nonetheless, it was also the slowest. During this period, SENSEX was at 18,000 level, its lowest, in 2013 and managed to touch 38,000 in August of 2018, i.e. a growth of nearly 2 times in 6 years.
  • The bull run started in 2013 with the rise of Modi in Indian politics. It was a period when anti-incumbency was at its peak and the nation was infuriated with revelation of scams and corruption. India desperately wanted a new Leader. In 2014, Modi led his party, BJP, to victory with NDA forming the government at the centre.
  • Prior to the National Politics, Modi had been the Chief Minister of Gujarat for three consecutive tenures. Industries in Gujarat prospered under his realm and he was therefore expected to reproduce same results in Centre as well. With initiatives like Make in India and Digital India, BJP did not disappoint the Market.
  • In 2017, Mid-Cap and Small-Cap companies surged to new highs. The rally was expected to continue in 2018, but the NBFC crisis of September 2018 shook the sentiments of the investors.
  • Although the markets did not fall considerably, yet they were not able to grow at the same pace again. In 2019, the market was again shaken by global tensions (trade war between US and China) and volatility in crude price.
  • With the highly criticized budget of 2019 coupled with the GDP rate falling below 5%, the bull run is now believed to be over.

Conclusion

  • Bull runs, thus, might provide lucrative opportunities for making quick money for traders, but, on the contrary, are not so welcomed by value investors (who are in for the long run).
  • It is therefore rightly said by Mr. Warren Buffet, “Be fearful when others are greedy and be greedy when others are fearful”.
Nifty Equity Indices : 13 Broad Based Indices

Exploring Nifty Equity Indices

Detailed Explanation of Nifty 50, Nifty Next 50 & 11 More Nifty Indices

Introduction

Nifty50 and Sensex are the most popular, also widely tracked and traded indices in the Indian stock markets. However, these are not the only two. There are many more Nifty Indices. In this article, we are exploring the Nifty equity indices in broad based index category in detail.

Exploring Nifty Equity Indices

NSE Indices Limited maintains equity indices comprising broad-based benchmark indices(13), sectoral indices(11), strategy indices(27) and thematic indices(20).

Exploring the World of Nifty Equity Indices
Exploring the World of Nifty Equity Indices
Source : NSE Indices

What are Nifty Broad Based Indices?

  • Nifty Equity Indices in Broad Based category are the indices which consist of the large, liquid stocks listed on the Exchange.
  • They serve as a benchmark for measuring the performance of the stocks or portfolios such as mutual fund investments.
  • NSE is having total 13 broad based indices. These are:
    1. Nifty 50
    2. Nifty Next 50
    3. Nifty 100
    4. Nifty 200
    5. Nifty 500
    6. Nifty Midcap 50
    7. Nifty Midcap 100
    8. Nifty Midcap 150
    9. Nifty Smallcap 50
    10. Nifty Smallcap 100
    11. Nifty Smallcap 250
    12. Nifty LargeMidcap 250
    13. Nifty MidSmallcap 400
Nifty Equity Indices : 13 Broad Based Indices
Nifty Equity Indices : 13 Broad Based Indices
Source : NSE Indices

Above Nifty index structure efficiently represents large, mid and small market capitalization segments of the Indian capital market. Let us try to understand this structure in detail :

NIFTY 500

NIFTY 500 represents the top 500 companies based on full market capitalization from the eligible universe. In a way, you can say that it includes all the other 12 indices within itself.

  1. NIFTY 100
    • NIFTY 100 represents top 100 companies based on full market capitalization from NIFTY 500. This index intends to measure the performance of large market capitalization companies.
  2. NIFTY Midcap 150
    • NIFTY Midcap 150 represents the next 150 companies (companies ranked 101-250) based on full market capitalization from NIFTY 500. This index intends to measure the performance of mid market capitalization companies.
  3. NIFTY Smallcap 250
    • NIFTY Smallcap 250 represents the balance 250 companies (companies ranked 251- 500) from NIFTY 500. This index intends to measure the performance of small market capitalization companies.

So as you see, the index Nifty 500 is basically made up of the following 3 heads :

  • (1 to 100) – Nifty 100
  • (101 to 250) – Nifty Midcap 150
  • (251 to 500) – Nifty Smallcap 250

NIFTY 100

The Nifty 100 has 2 parts : NIFTY 50 and NIFTY Next 50

  1. NIFTY 50
    • The index represents 50 companies selected from the universe of NIFTY 100 based on free-float market capitalization and liquid companies having average impact cost of 0.50% or less for 90% of the observations for a basket size of Rs. 10 Crores.
    • The constituents should have derivative contracts available on NSE.
  2. NIFTY Next 50
    • It represents the balance 50 companies from NIFTY 100 after excluding the NIFTY 50 companies.
Detailed Stock Analysis by Invest Yadnya
Detailed Stock Analysis by Invest Yadnya

NIFTY Midcap 150

It has also 2 parts : NIFTY Midcap 50 and NIFTY Midcap 100.

  1. NIFTY Midcap 50
    • It includes top 50 companies based on full market capitalization from NIFTY Midcap 150 index and on which derivative contracts are available on NSE.
    • In case 50 Midcap stocks do not have derivatives contract available on them then it could have less than 50 stocks in the index.
  2. NIFTY Midcap 100
    • It was formerly known as ‘NIFTY Free float Midcap 100’.
    • It includes all companies from NIFTY Midcap 50. Remaining companies are selected based on average daily turnover from NIFTY Midcap 150 index.

NIFTY Smallcap 250

It has also 2 parts : NIFTY Smallcap 50 and NIFTY Smallcap 100.

  1. NIFTY Smallcap 50
    • It represents top 50 companies selected based on average daily turnover from top 100 companies selected based on full market capitalization in NIFTY Smallcap 250 index.
  2. NIFTY Smallcap 100
    • It was formerly known as ‘NIFTY Free float Smallcap 100’.
    • It includes all companies from NIFTY Smallcap 50.
    • Remaining companies are selected based on average daily turnover from top 150 companies selected based on full market capitalization from NIFTY Smallcap 250 index.

There are 3 more NIFTY Broad based indices.

NIFTY 200

In simple words, we can say NIFTY 200 includes all companies forming part of NIFTY 100 and NIFTY Midcap 100 index. ie. (NIFTY 50 + NIFTY Next 50 + NIFTY Midcap 100)

NIFTY LargeMidcap 250

It includes all companies from NIFTY 100 and NIFTY Midcap 150. It intends to measure performance of the large and mid-market capitalization companies.

NIFTY MidSmallcap 400

It includes all companies from NIFTY Midcap 150 and NIFTY Smallcap 250. It intends to measure performance of the mid and small market capitalization companies.

Base Date

The base date and base value for the NIFTY indices is as follows :

base date and base value for the NIFTY indices
Base date and base value for the NIFTY indices
Source : NSE Indices

Calculation and dissemination

  • The broad indices such as NIFTY 50, NIFTY Next 50, NIFTY 500, NIFTY 100, NIFTY Midcap 150, NIFTY Smallcap 250, NIFTY 200, NIFTY Midcap 50, NIFTY Midcap 100, NIFTY Smallcap 50, NIFTY Smallcap 100 and NIFTY MidSmallcap 400 are calculated online on all days that the National Stock Exchange of India is open for trading in equity shares and disseminated through trading terminals and website and
  • NIFTY LargeMidcap 250 is computed at end of the day.

%d bloggers like this: