How to Nifty 50 Calculated?
Nifty 50 is calculated by the method of free-float market capitalization. It will get the index bar of their current values of your NEST trading platform. Here NEST trader means it is a powerful advanced software in share trading in India.
What is a Free-Float Market Capitalization?
Every company has free-float shares. They can give in the open market for trading. But not giving all shares for free-float. But the only government or company promoters or foreign direct investors. Many investors look to active securities because they can trade them even it is a large quantity of loss without their price.
Nifty calculation :
It bases the free-float method on the market capitalization weight index. Here we have to compare with a smaller market cap company. The difference in the index of large stocks.
Some important points to calculate nifty 50
It takes the base year in 2004
2000 is the base value
Nifty has 50 top stocks in 24 sectors.
Market capitalization = shares incomplete* market price per share
Free float market capitalization = shares incomplete* price *IWF( Investible weight factor)
Index value = current market value/base market capital * base index value
For example, we have compared two stocks A and B
Think A has 500 shares. The company holds 200 shares along with him and the remaining 300 shares for free-floating. A will say the price Rs. 5.
Next, B will hold 1000 shares. The company has 800 shares along with him and the remaining 200 shares for free-floating. B will say the price Rs. 10.
A Total market capitalization = 500*5 = 2,500
Free-float market capitalization of A = 300*5 =1,500
Here B total market capitalization = 1000*10=10,000
B free-float market = 200*10=2,000
Total free-float market capitalization of A & B =(1500+2000)=3,500
Let assume the base year index was 1,500.
Then, CALCULATION = 3500*2000