The Sensex and the Nifty can measure the stock market’s condition. The Nifty is the collection of the top 50 largest companies whose performance impacts the overall market performance. The Nifty 50 represents the top 50 companies on the National Stock Exchange (NSE), while the Sensex represents the top 30 companies on the Bombay Stock Exchange (BSE), which affects the overall market.
When you start investing, you may not want to take a more significant risk, but by investing in the Nifty 50, you minimise the risk considerably. To make you understand quickly, let’s know what the company goes through to get into the Nifty 50.
Procedure to Enter the Nifty 50
For a company to enter the Nifty 50, the first requirement is that it should be listed on the stock exchange:
- The company’s free flow (stocks open for trading in public) should be at least 10%.
- The stock should be highly liquid and should be 100% in the last six months, where liquidity means that for every buyer, there should be a seller willing to sell his stock at the moment without waiting, allowing the transaction to take place on the spot, quickly and easily.
- The company’s market capitalisation should be greater than 20,000 crores and should have 1.5% more market capitalization than the previous company, or the 50th company in the Nifty 50 index.
Why Investing in the Nifty Stocks a Good Idea?
The Nifty 50 will be rebalanced twice a year when a new firm meets more criteria than a company that is currently listed on the Nifty 50. That stock will be replaced with a new stock that meets more criteria than the stocks that are already in the Nifty 50 index. Thus, investing in these stocks will give better stability to the portfolio.
Moreover, these 50 stock equities alone account for 65% of the total market capitalisation of all companies listed on the NSE. As a result, you can utilise the NIFTY 50 index as a guide. It is an excellent place to start investing in the market because a small number of stocks provides maximum exposure to the entire market.
Nifty 50 Investment Benefits
The benefits of investing in the Nifty stocks companies include:
1) Investing your hard-earned money into leading companies in India
2) Providing safe and good returns
3) Stability as the companies are not majorly affected by the ever-fluctuating economy
4) Some big Nifty companies also provide good dividends. It can also be termed a small share of profit
5) One will also get tax benefits while filing an income tax return.
All these factors will help you make informed decisions in the online stock investing world. Nevertheless, to understand the functionality of the market you may need some time and learning basic concepts and terminology. Happy investing!
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.
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