Investors must make a habit of using market indices, like the NIFTY 100, NIFTY 500, and others. These indices allow investors to analyse the performance of their portfolios through benchmarking. Not to forget, you can find several investment products linked to the popular market indices in India. These market indices are more than essential for beginners, as they can get an idea of the current market performance. Read on to understand what is the NIFTY 100 index and its benefits.
NIFTY 100 is a popular stock market index launched and operated by the National Stock Exchange (NSE). Part of the NIFTY series of indices, the NIFTY 100 consists of a hundred companies listed on the NSE. It includes 100 large-cap companies that are selected based on the full market capitalisation. However, the index value is not based on the full market capitalisation. The methodology for the calculation of these indexes is based on the free-float market capitalisation.
Constituents for the NIFTY 100 index are selected from the NIFTY 50 and NIFTY NEXT 50 indices. The index includes some popular large-cap companies like Reliance Industries, HDFC Bank, Infosys, and Housing Development Finance Corporation. The NIFTY 100 index helps investors understand the performance of the entire large-cap segment in India. This index has a base or reference date of January 1, 2003, to calculate future index values. The predetermined base value for the NIFTY 100 index is 1000. You can rely on the NIFTY 100 index for investment research, benchmarking, and more.
Are you trying to invest in NIFTY 100 shares? If yes, you must understand the return prospects of NIFTY 100. Like any other index, NIFTY 100 has seen ups and downs due to market conditions. However, the index has provided good returns in the long run to investors in the large-cap segment. When we consider the last fifteen years, the index has provided a return of 12.3% per annum.
The return for the past 1 year and six months by the index is 7.10% and 8.65%, respectively. If we consider the past 1 month, the index has delivered a return of 5.29%. As you can see, the return prospects of these indexes are good. Investors can find Systematic Investment Plans (SIPs), Exchange Traded Funds (ETFs), and mutual fund schemes to benefit from the return prospects of the NIFTY 100 index.
As discussed above, stocks for the NIFTY 100 index are selected based on the full market capitalisation. The full market capitalisation of a company is obtained by multiplying the total number of issued shares by the current share price. It is crucial to note that the full market cap of a company considers all issued shares to date, including those held by promoters and insiders. The NIFTY 50 and NIFTY Next 50 indices help decide the constituents of this index.
Once 100 stocks are selected for the index, they are weighted based on the free-float market cap. The free-float market cap of a company is entirely different from the full market cap. Free-float market cap of a company can be obtained by multiplying the number of outstanding shares available for trading by the current share price. When calculating the free-float market cap, we do not consider shares that aren’t available for trading. Shares held by promoters, insiders, founders, and employees are usually not available for trading.
Once the free-float market capitalisation for the index is known, you can get the index value. The formula to calculate the NIFTY 100 index value is as follows:
NIFTY 100 Index Value = Free-Float Market Cap / (Base Free-Float Market Cap * 1000)
Note: The 1000 in the above formula is the base index value of the NIFTY 100 index.
Since the free-float market cap of companies can change with time, the index value can also change. Also, there are eligibility conditions for stocks to be included in the NIFTY 100 index. For the same rationale, the NIFTY 100 index is reconstituted twice every year, on January 31 and July 31 by the NSE. You don’t have to waste time in the calculation part, as it will be handled by the NSE.
You cannot invest directly in a market index in India. A market index like the NIFTY 100 is meant for benchmarking and research. The value of the NIFTY 100 index represents the performance of the entire large-cap segment. Investors can use it to understand the market direction but cannot invest directly. However, you can replicate the performance of the NIFTY 100 index by including the same stocks in your portfolio.
Also Read: What is NIFTY Midcap 100
Investors willing to benefit from the return prospects of the NIFTY 100 index can search for collective investment schemes. You can invest in mutual funds and ETFs that track the performance of the NIFTY 100 index. These collective investment schemes replicate the NIFTY 100 index to provide high returns. You can also invest in a mutual fund scheme through a SIP to benefit from the growth of the NIFTY 100 index.
As discussed above, NIFTY 100 consists of stocks of 100 large-cap companies in India. Here are some of the major stocks included in the NIFTY 100 index:
To know all the stocks included in the NIFTY 100 index, you can check online. You can visit the official website of NSE to know the constituents of the NIFTY 100 index. Investors can also visit online portals or websites of trusted stockbrokers to collect more information on the NIFTY 100 index.
You already know that the index value is not static. The NIFTY 100 index value will change based on several factors. For instance, internal factors of a company will decide its stock performance, thus impacting the index value. A company’s work culture, funding, and other internal factors play a role in its financial success. Similarly, certain external factors impact the performance of the NIFTY 100 index.
Annual budget, monetary policy, GDP, regulatory structure, and other external factors impact the performance of stocks in the NIFTY 100 index. For instance, a strict regulatory framework might create challenges for large-cap companies in India. In such a case, they might fail to maintain their financial performance in India. When the financial performance of index constituents plummets, the index value also goes down.
Are you planning to invest with the help of the NIFTY 100 index? Here are the advantages of the NIFTY 100 index for investors:
Before you purchase NIFTY 100 stocks, here are some disadvantages to know:
NIFTY 100 shares are not included randomly. The NIFTY 100 index has fixed eligibility criteria for selecting the constituent. Here are some conditions for the NIFTY 100 index:
NIFTY 100 is a reliable index for investors interested in the large-cap segment. It includes the top 100 companies with a high market cap in India. You can find mutual funds, SIPs, and ETF schemes to benefit from the growth of the NIFTY 100 index. Beginners in the stock market must know how to benefit from the NIFTY 100, NIFTY 500, and other indices. Check the live NIFTY 100 index value now!