Evolution of Nifty 50: Origin to Impressive Heights

Nifty Overview 

The Nifty 50 Index was introduced in April 22, 1996 and comprises heavyweight companies in term of full market capitalization. However, in June 2009, it shifted to the free float methodology resulting in great rebalancing among different sectors. The Index is re-balanced on a semi-annual basis. 

Nifty 50 Index is a well-diversified index consisting of 13 sectors with 50 blue chip large-cap companies and most liquid stocks listed on the NSE in India. 

Over the years, it has been used for a variety of purposes such as benchmarking fund portfolios, index-based derivatives and index funds. It is computed using the free float market capitalizing method.  

Evolution 

Over the years, the weights of sectors have changed significantly due to changes in market dynamics. When Nifty began its journey it had no representation from technology and was dominated by the consumer, PSU banks and other sectors such as oil & gas, NBFCs, autos, metals and textile. 

In 1995 the highest weightage assigned to Financial Service was 20%, Consumer Goods was 19% whereas the lowest weightage of Industrial Manufacturing was 0.6% and no contribution from the Information Technology sector. 

In 2005, Oil & Gas Sector weightage jumped from 9.8% to 25% and Information technology from 0% to 20% whereas Fertilizers & Pesticides and Textile sector was removed from the Index. Telecom sector entered the Index with a weightage of 6.3%. 

In 2015, have seen a significant jump in the weightage of Financial Services leading the Nifty 50 Index by 31% from 12.8% in 2005, a sharp fall in Oil & Gas Sector from 25% to 9.1% whereas there was a gradual increase in both Consumer Goods and Automobile by 2.1% and 3.1%. Both Chemical and Consumer services were removed from the Index.  

In 2021 four major sectors were contributing to the Index by 77% in totality i.e. Financial Services by 37%, Information Technology by 17.9%, Oil & Gas 11.9%, Consumer Goods 10.8%. Whereas Media, Entertainment & Publication and Industrial Manufacturing Sector were removed from the Index. 

As on April 2023, following are the weightage of different sectors in Nifty 50-

Financial Services 38.44%, IT 12.74% Oil & Gas 12.15%, FMCG 9.73%, Automobile 5.52%, Healthcare 3.8%, Construction 3.6%, Metal & Mining 3.34%, Consumer Durables 3.04%, Telecom 2.47%, Power 2.05%, Construction Material 1.90%, Services 0.65%, Chemicals 0.48%. 

Over the period, sectors and their weights changed significantly adding to the Nifty 50’s contribution.  

The Stock’s unbreakable journey with Nifty 50 

Out of 50 companies in the Nifty 50, these 12 companies have been part of the index’s journey since its inception – Reliance Industries, Hindustan Unilever, Tata Motors, HDFC Bank, ITC, TATA Steel, SBI, Hindalco, HDFC, ICICI Bank, Bajaj Auto, Larsen & Toubro and still they are a part of Nifty 50, as on May 2023. Although it is also true that their weights changed from time to time since Nifty’s inception. Currently the top five companies in Nifty 50 in 2023 as per weightage are – Reliance Industries 10.32%, HDFC Bank 9.38%, ICICI Bank 8.08%, HDFC 6.34%, Infosys 5.63%, enjoying weightage of over 5%.