What is Nifty?: A Beginner’s Guide to India’s Stock Market Indices
- Share.Market
- 10 min read
- 15 Sep 2025
It is never too early to start understanding how financial markets work, especially if you are exploring investing for the first time. Whether you are curious about stocks, crypto, or ETFs, it’s essential to know about key market indicators.
In India, Nifty is the market index conceived and launched in the year 1996 by the National Stock Exchange (NSE). It contains a host of indices such as Nifty 50, Nifty Bank, Nifty Metal, Nifty IT, and more. These indices are also traded in the Futures and Options segment of NSE.
Among the Nifty indices, Nifty 50 is one of the key indicators of the Indian economy as it represents the top 50 stocks listed on the National Stock Exchange (NSE). Nifty itself is one of the two major indices of the Indian stock market, the other being Sensex, introduced by the Bombay Stock Exchange (BSE).
Mutual fund houses use these broad indices as benchmarks to review the performance of the Indian stock market. Nifty is a broader index as compared to Sensex and offers a more accurate overview of the Indian stock market. More details about what is NIFTY and the top 50 companies listed under NIFTY 50 are shared below.
What Exactly is the Nifty?
Nifty is the broad market index reflecting the performance of all the securities listed on the NSE. It consists of over 750 businesses, including large, mid, and small-cap stocks.
Though the mention of Nifty is often considered as Nifty 50, the Nifty family consists of broader Nifty indices such as Nifty 100, Nifty 200, and Nifty 500. More details about some of the broader indices other than Nifty 50 have been mentioned below:
| Nifty Index Name | Market Segment | Number of Stocks | Representation of FFMC of the stocks listed on NSE (In %) |
| Nifty 500 | Large Cap | Top 100 stocks | 92.29% |
| Mid Cap | Top 150 stocks | ||
| Small Cap | Top 250 stocks | ||
| Nifty 100 | Large Cap | Nifty 50 + remaining top 50 large-cap stocks | 66.98% |
| Nifty 200 | Large Cap | Nifty 100 stocks | 79.90% |
| Mid Cap | Nifty Midcap 100 stocks |
Also, Nifty comprises many sectoral indices that track the sector-wise performance of Nifty stocks. Some of the major Nifty sectoral indices are given in the table below:
| Name of the Index | Description |
| Nifty Oil & Gas | This index covers all the major stocks (listed on NSE) involved in oil refineries, oil marketing, and gas distribution firms. |
| Nifty Consumer Durables | This index covers all the major stocks involved in businesses related to lifestyle products, electronics, and other non-essential household appliances. |
| Nifty Infra | This index covers the major companies involved in engineering, construction, and infrastructure development. |
| Nifty Realty | This Nifty index covers the stocks related to real estate. |
| Nifty Energy | This index covers the stocks related to oil, coal, gas and power industries. |
| Nifty Auto | It covers the stocks related to the automobile sector i.e. automobile manufacturing companies, ancillaries, etc. |
| Nifty Pharma | It covers the stocks belonging to the healthcare and pharmaceutical sector. |
| Nifty Fast Moving Consumer Goods (FMCG) | This index covers the stocks belonging to the FMCG sector, such as the companies involved in the manufacturing of food, household products, personal care products, etc. |
| Nifty Financial Services | This index covers insurance, banking, housing finance, Non-Banking Finance Companies (NBFCs), etc. |
| Nifty Bank | The top stocks representing the Indian banking sector are covered by this index. |
There are many more Nifty sectoral indices that you can go through and understand before investing in the stock market. Most of these Nifty Indices are rebalanced after every six months, i.e. semiannually, based on the performance of individual stocks. As an investor, you can compare their returns over 1, 5, or 10 years before investing in specific sectors.
On the other hand, the Nifty 50 is India’s benchmark stock market index. It is one of the indices listed under Nifty. Nifty represents the broader collection of indices that covers the stocks listed under different sectors. The major sectors covered by the Nifty include:
- Metals
- Energy
- Pharmaceutical
- Information Technology
- Telecommunications
- Entertainment & Media
- Automobiles
- Pesticides & Fertilisers
- Financial Services
- Cements & Products
- Consumer Goods
- Chemicals
- Healthcare
- Others
These stocks also offer higher liquidity, allowing you to invest and sell the shares in bulk quantities. If you want a glance at how the Indian market is performing, the Nifty 50 provides you with that snapshot in a single number.
Types of Nifty Indices
Nifty indices can be classified into two types, viz., market-moving indices and sectoral indices. More information about these types is shared in the table below:
| Broad Market Movers | Sectoral Indices |
| These Nifty indices are classified on the top stocks that are primarily responsible for moving the market. For instance, Nifty 50, Nifty 100, Nifty 500, Nifty Smallcap 250 and Nifty Midcap 150 are considered to be the broad market movers of the NSE. | These Nifty indices are classified on the basis of the sectors. These indices contain the major stocks that represent a particular sector. For instance, Nifty IT comprises the top 10 stocks that represent the performance of the IT sector in the Indian economy. Nifty Metal contains the top 15 stocks that represent the performance of the metal sector as a whole in the Indian economy. |
| The broad market movers are also known as index movers, as their performance determines the performance of the index as a whole. These indices do not represent any one particular sector or industry. | The sectoral indices move up or down according to the movements of the top stocks belonging to a particular sector. All the top stocks belonging to a specific sector can be found in a sectoral index. For instance, Nifty Bank contains all the major bank stocks listed on the NSE. Similarly, Nifty Energy represents all the major energy stocks listed on the NSE. |
These specific types of Nifty indices help you invest in a particular area or sector of the Indian share market. So, you must study them properly to understand how stocks are categorised and tracked in the Indian stock market.
How do NSE Stocks Proclaim A Place in the Nifty Index?
The NSE stocks get officially declared as a Nifty stock after fulfilling these eligibility criteria:
- The stock company must consistently reflect a 100% trading frequency for 6 months.
- The company must be registered with the NSE, and its domicile must be within India.
- The stock’s free-floating market capitalisation must be at least 1.5 times higher than NSE’s smallest listed stock.
- The stock must provide sufficient liquidity to allow you to trade in large numbers.
Why Should You Analyse the Nifty Index?
Nifty can be a great place to start investing, especially if you are just starting your stock market investments as a beginner. It includes companies you have probably heard of, such as Infosys, Reliance, HDFC Bank, and TCS. These are big names that set the tone for how the economy is moving.
If you are a new investor, you must understand the broad market trends before diving into individual stocks. The Nifty index helps you do exactly that. You can replicate how the Nifty works by picking the best 50, 100, or 150 stocks from it to diversify your investment portfolio. If you don’t want to take any risks, you can invest in mutual funds through SIP and take advantage of compounding. You can use tools like CRISP by Share.Market to analyse funds and decide which one works for you based on your financial goals and risk appetite.
How is Nifty Calculated?
The index is calculated using a method called the free-float market capitalisation. It reflects the value of shares that are actively available for trading on the stock market and does not include the total number held by promoters or institutions.
The Nifty 50 stocks are reviewed semi-annually, i.e. every six months, to make sure it continues to represent the strongest companies in the Indian market. If a company underperforms, it may be replaced by one that reflects the current economic strength in a better way.
Trading Strategies Using Nifty
If you are just starting out, you do not have to buy all Nifty or even Nifty 50 stocks, for that matter. Instead, you can invest in:
- Index Funds: These are mutual funds that replicate the Nifty 50 portfolio. They are low-cost and great for beginners.
- ETFs (Exchange-Traded Funds): Similar to index funds, but traded like stocks. They are more flexible and can be bought or sold throughout the trading day.
- Options and Futures: These are derivatives based on the Nifty 50 and are better suited for experienced traders due to their complexity and risk.
- Swing and Positional Trading: Some traders use technical analysis on the Nifty chart to make short-term trades based on patterns and indicators.
Why is the Nifty 50 a Big Deal?
The Nifty 50 isn’t just a list of big companies; it’s a clear indicator of our country’s economic condition. It reflects our economic health and robustness to withstand market fluctuations.
When the Nifty goes up, it usually means businesses are doing well, consumer confidence is high, and the economy is growing. When it drops, investors often get cautious. For anyone interested in understanding or entering Indian markets, tracking the Nifty 50 is a smart starting point.
In a Nutshell
Nifty is more than just a number on a screen. It is a gateway to understanding how economies move, how industries perform, and how you can start building long-term wealth. Whether you are investing Rs. 500 or Rs. 5,000, knowing where the market stands gives you the clarity and confidence to take your next step.
At Share.Market, we are passionate about helping young investors like you make informed financial decisions. Visit our online platform to learn more about share trading and its nuances!
FAQs
The Nifty index currently stands at 25,062, which is 25 times its base value of 1000.
Though historically, Sensex has performed slightly better than Nifty 50, which represents a broader market sentiment as it comprises 50 stocks as compared to the top 30 stocks of Sensex. So, it offers higher liquidity, and more trading activity can be seen pertaining to it.
Nifty 50 and Sensex are the two most referred indices in India.
Nifty 50 has diversification across top companies, but like all equity investments, it carries market risk.
You can invest via Nifty 50 index mutual funds or ETFs, available through most brokers and investment platforms. You can also directly invest in stocks tracked by Nifty 50 by copying the weightage.
Its performance is driven by corporate earnings, macroeconomic trends, global markets, and sectoral weightings, especially banking, IT, and energy.
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