Article

Nifty
June 07 , 2012

The NSE Nifty is an index, which means that it is a barometer to stock market performance. In this case, it measures performance of the equity markets. The equity markets cover the ~4,500 listed companies, and the Nifty takes 50 selected larger stocks among them. It considers the prices of these stocks in the NSE on a daily basis, and weighs them by what is called free float market capitalization.

While the Nifty is often considered to represent the market as a whole, this is somewhat inaccurate. It measures the performance of the larger stocks, which often behave differently from the rest of the market. Yet, the Nifty and its sibling the BSE Sensex, are the most measured barometers of Indian equity markets and several institutional and retail investors India and abroad track them very closely and make investment decisions on their basis.

An important point to note is that Nifty number in itself is irrelevant and does not represent anything. The useful parameter to measure is the gain or loss over a period of time, especially in percentage terms.

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