12 Fascinating Facts You Didn’t Know About the NSE and Its Iconic NIfty 50 Index

Situated in Mumbai, the National Stock Exchange of India Limited (NSE) is a cornerstone of India’s financial markets. It’s owned by a group of respected financial institutions like banks and insurance companies. NSE is known globally as the largest derivatives exchange by contract volume and ranks third for cash equities trading.

Here are 12 important facts that shed light on how NSE and its key index, the Nifty50, play a vital role in monitoring India’s stock market performance.

A Leading Indicator of the Indian Stock Market

The Nifty 50 is a stock market index that tracks the performance of the 50 largest companies in India by free-float market capitalization. These companies represent 13 different sectors of the economy, providing a broad picture of Indian equities. As of March 28, 2024, the Nifty 50 represents a significant portion of the Indian stock market, accounting for roughly 56% of the free-float market capitalization of companies listed on the National Stock Exchange of India (NSE).

Impressive Growth Trajectory

The Nifty 50 has witnessed significant growth since its inception in November 1995. The full market capitalization of the companies in the index has grown a staggering 127.74 times, from Rs. 1.44 trillion in 1995 to a whopping Rs. 183.95 trillion in May 2024. This translates to a healthy compound annual growth rate (CAGR) of approximately 19.3%.

Reaching New Milestones

The Indian stock market, NSE, achieved a new landmark on May 23rd, 2024, with the combined market capitalization of companies listed on the NSE surpassing USD 5 trillion, or Rs 416.57 trillion. This remarkable growth highlights the increasing strength of the Indian stock market.

Top Contributors to the Market’s Growth

Five key companies have been instrumental in driving this growth: Reliance Industries Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd, ICICI Bank Ltd, and Bharti Airtel Ltd. These companies’ strong performance has significantly impacted the overall market capitalization.

Financial Services Sector Leads the Way

In 1995, the Financial Services sector held the top position in the Nifty50 index with a weightage of 20%. As of 2024, it stands at 34.29%, indicating a substantial increase in weightage. Oil & Gas, currently at the number two position with a weightage of 12.69%, previously held the top spot in 2005 with almost 25% weightage in the index.

Nifty 50 Reaches New Highs

The Nifty 50 scaled a new all-time high of 23,110.80 on May 27, 2024. It took 133 days (89 trading sessions) for the Nifty to climb 1,000 points and cross the 23,000 mark from the level of 22,000 achieved on January 15, 2024. This growth indicates a steady rise in the index.

Consistent Members Since Inception

Interestingly, despite the bi-annual review process that excludes companies with declining market capitalization and includes emerging ones, eleven companies have maintained their position in the Nifty 50 since its inception in 1995.

This highlights the enduring strength and stability of these companies within the Indian economy.

Highest Return in a Single Year

The Nifty delivered its highest single-year return in history, with a gain of about 72% in 2003. Interestingly, the year began with a negative return, as the Nifty declined by 4.73% in January. The declines continued sharply in March and April, with drops of 8.01% and 4.51%, respectively. However, following these losses, the index experienced an eight-month winning streak. As a result, the Nifty surged by 72% in 2003.

Satyam was Replaced by Reliance Capital in Nifty 50

In January 2009, the National Stock Exchange removed Satyam from its benchmark index, Nifty50 and replaced it with Reliance Capital. However, later in 2011, Reliance Capital was replaced by Coal India in the Nifty50 index.

Faster Settlement Cycle

Following China’s lead, India became the second country globally to implement a ‘trade-plus-one’ (T+1) settlement cycle for top listed securities on January 27, 2023. This move has enhanced operational efficiency, expedited fund remittances and share delivery, and simplified the process for stock market participants.

Rising Price-to-Book Ratio

The Price-to-Book (P/B) ratio of the Nifty 50 has climbed to 4.03, reflecting a 5.77% increase since the beginning of 2024. This suggests that investors are placing a higher value on the Nifty 50 companies relative to their book value, indicating investor confidence in the Indian stock market.

Domestic Investors Driving the Market

Foreign Institutional Investors (FIIs) have been net sellers in the Indian equity market throughout 2024, except for March. Conversely, Domestic Institutional Investors (DIIs) have consistently supported the market, acting as net buyers for all months so far this year. This data indicates that the recent highs of the Nifty 50 are primarily driven by domestic investors rather than foreign inflows.

Conclusion

The Nifty 50 index serves as a benchmark of the Indian stock market’s health. Its impressive growth trajectory, recent record highs, and the increasing participation of domestic investors all paint a promising picture for the Indian equities market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.