Nifty 50

Introduction

In the United States, the term Nifty Fifty was an informal designation for fifty popular large cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks, or "Blue chip" stocks. 

What was the 'Nifty 50'

The Nifty 50 was a group of 50 stocks that were most favored by institutional in the 1960s and 1970s. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.

The NIFTY 50 is a diversified 50 stock index accounting for 12 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

NIFTY 50 is owned and managed by India Index Services and Products Ltd. (IISL).  IISL is India's specialised company focused upon the index as a core product.

·         The NIFTY 50 Index (future  and option) represents about 62.9% of the free float market capitalization of the stocks listed on NSE as on March 31, 2017

·         The total traded value of NIFTY 50 index constituents for the last six months ending March 2017 is approximately 43.8% of the traded value of all stocks on the NSE.

·         Impact cost of the NIFTY 50 for a portfolio size of Rs.50 lakhs is 0.02% for the month March 2017. NIFTY 50 is ideal for derivatives trading.

 

Characteristics

 

The stocks were often described as "one-decision", as they were viewed as extremely stable, even over long periods of time.

The most common characteristic by the constituents were solid earnings growth for which these stocks(options) were assigned extraordinary high price-earnings ratios. Fifty times earnings, far above the long-term market average, was common.

 BREAKING DOWN 'Nifty 50'

The Nifty 50 stocks got their notoriety in the bull markets of the 1960s and early 1970s. They became known as "one-decision" stocks because investors were told they could buy and hold forever.

Examples of Nifty 50 stocks included General Electric, Coca-Cola, and IBM. However, part of this list included companies that have been troubled in the last decade, such as Xerox and Polaroid.

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