Definition vs. Sensex, How It Works, and History

What Is the CNX Nifty?

The term “CNX Nifty” refers to a regional stock market index found on the National Stock Exchange (NSE) of India.

The index is composed of 50 of the largest and most liquid stocks found on the exchange. The Nifty 50, as it is now officially known, represents the market and is used to benchmark Indian investments.

As with other major stock markets and indexes, such as the S&P 500, companies must meet market capitalization and liquidity requirements before they may be listed and included in the index.

How the CNX Nifty Works

The Nifty 50 was launched on April 22, 1996. The base period for the index is Nov. 3, 1995. That is the date on which its base value of 1000 was established. The ongoing performance of the index is compared to that base value.

The index is calculated on a real-time daily basis using a free-float market capitalization method. It is rebalanced semi-annually, with cutoff dates of January 31 and July 31 every year.

Index Sectors

The Nifty 50 is composed of 50 diverse companies from the following sectors:

• Financial Services
• Information Technology
• Oil, Gas & Consumable Fuels
• Fast Moving Consumer Goods
• Automobile and Auto Components
• Construction
• Healthcare
• Metals & Mining
• Consumer Durables
• Telecommunication
• Power
• Construction Materials
• Services
• Chemicals

Of the 14 sectors above, as of December 2023 the largest in the index were:

• Financial Services, with a weight of 35.26%
• Information technology, with a weight of 13.62%
• Oil and gas, with a weight of 11.40%

Top Companies by Weight

As of December 2023, the top ten companies in the index by weight were:

1. HDFC Bank Ltd. 13.52%
2. Reliance Industries Ltd. 9.20%
3. ICICI Bank Ltd. 7.36%
4. Infosys Ltd. 5.80%
5. Larsen & Toubro Ltd. 4.39%
6. ITC Ltd. 4.31%
7. Tata Consultancy Services Ltd. 4.05%
8. Axis Bank Ltd. 3.22%
9. Kotak Mahindra Bank Ltd. 2.95%
10. Bharti Airtel Ltd.HDFC Bank 11.21%

Index Use

The Nifty 50 is a representation of the Indian stock market. Investors interested in the returns that that market may offer can trade ETFs that track the Nifty 50. It is also used as a benchmark for financial products traded on the NSE such as fund portfolios, index-based derivatives, and index funds.

History

The CNX Nifty was referred to as the Standard & Poor’s CNX Nifty until Jan. 31, 2013. But the index changed its name to CNX Nifty after the NSE ended its licensing agreement with Standard & Poor’s (S&P).

Then in 2015, the NSE officially rebranded the CNX Nifty as the Nifty 50.

Variations of the index include the Nifty 50 USD, the Nifty 50 Total Returns Index, and the Nifty 50 Dividend Points Index.

Index Ownership

The Nifty 50 index is owned and managed by NSE Indices Limited. As of November 30, 2023, the company’s portfolio included more than 350 Nifty-branded indices.

Nifty 50 vs. Sensex

The other prominent Indian market index is known as the Sensex. Sensex is the oldest market index for equities in India.

The Sensex tracks the 30 largest, most liquid, and financially healthy companies listed on the Bombay Stock Exchange (BSE). It represents more than 40% of the total market capitalization of the BSE. This index was launched in 1986 and provides time-series data from April 1979 onward.

The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and trading on it commenced in 1994.

Both exchanges follow the same trading mechanism, trading hours, and settlement periods and processes.

The Bottom Line

The CNX Nifty, known since 2015 as the Nifty 50, is an equity index that measures the performance of the 50 largest and most liquid companies listed on India’s National Stock Exchange.

In January 2024, India’s stock market surpassed China’s as the fourth-largest stock market in the world.