Full form of NIFTY

The term NIFTY full form is National Stock Exchange Fifty. This term is coined because in NIFTY the constituents are fifty actively traded stocks. On April 21,1996 an equity yardstick was proposed and approved which was known as NIFTY. NIFTY is the wider index of the National Stock Exchange (NSE) which is the largest stock exchange in India.

On June 12 the National Stock Exchange (NSE) announced the inferential trading with the index futures. Now the future agreements follow the NIFTY 50. It was on June 4 2001 the NSE opened trading in index options.

NIFTY normally is a collection of fifty traded stocks but now it is increased by one. Apart from being known as NIFTY50, NIFTY is also known as CNX NIFTY. NIFTY is owned by India index Services and Products Limited (IISL). This Indian company is adept on focusing on indices as its prime output. It is the most prominent product with a lobby of ETF, ETF F&O and other index fund alternatives and OTC subordinates.

Eligibility for NIFTY

Here are the most prominent things that should be kept in mind if you are looking to know how to be eligible for NIFTY.
1. Keep your liquidity checked. Make sure that the stocks trading scales on an average cost of 0.50% or less in the previous 6 months.
2. The float adjustment capitalization of the market of the companies must be twice the minimal index constituent.
3. You can only trade as per NSE guidelines if you have an Indian domicile.

Procedure to buy Equities

Procedure to buy Equity in a secondary market is hassle free. Keep the following points in mind:

1. You need to have a demat account with a DP also known as depository participant.
2. Find a broker and help yourself with an active trading account.
3. Make sure your trading and demat accounts are linked with your bank account.

The broker trades the share based on the orders given in the terminal by the National Stock Exchange. He will then issue a contract bill explaining the shared stock value plus the brokerage cost. The broker accumulates the shares by the settlement process. Then it is paid on behalf of the investor. The order is then completed on the date of final settlement.

How to calculate the NIFTY?

Let us use the below formula to calculate NIFTY

Market Capitalization = Equity Capital * Price

Free Float Market Capitalization = Equity Capital x Price * Investable Weight Factor

Index Value = Current Market Value / Base Market Capital * Base Index Value (1000)

This is known as the free float market capitalization method. In this method the value of the index tells the cumulative market value of the stocks as per the given base period.

Investible Weight Factor or IWF is the factor that finalises the quantity of shares available for buying and sharing. The index is calculated live daily as the script value changes every day.

Wrapping Up

Not to forget that the base interval used to determine the NIFTY index is the same as the closed price on November 3 ,1995, the base has been fixed at 1000 and the base capital is Rs 2.06 trillion.