The Nifty 50 refers to the fifty most popular large-cap stocks that traded at high valuations in the 1960s and 1970s. They included household names such as Xerox (XRX), IBM, Polaroid and Coca-Cola (KO). Due to their proven growth records and continual increases in dividends, the Nifty Fifty were viewed as "one-decision" picks: investors were told to buy and never sell.
Many Nifty 50 stocks sported price-to-earnings (P/E) ratios as high as 100 times earnings. They propelled the bull market of the early 1970s, only to come crashing down in the 1973-74 bear market. That period was marked by political scandal and rising oil prices and interest rates.
In 1996, the Nifty 50 gained an additional meaning in the financial industry. It refers to the NIFTY 50 Index on the National Stock Exchange of India.
Companies in the Nifty 50
There was no definitive list of companies comprising the Nifty 50, as it was not an official benchmark. The companies typically shared these characteristics: strong balance sheets, consistent growth and global reach. In 1972, Morgan Guaranty Trust produced its own list of Nifty 50 stocks, which included still recognizable names such as:
- Phillip Morris (PM)
- Pfizer (PFE)
- Bristol-Myers (BMY)
- Coca-Cola Company (KO)
- Merck (MRK)
- General Electric (GE)
- PepsiCo (PEP)
- Eli Lilly (LLY)
- Procter & Gamble (PG)
- Revlon (REV)
- Johnson & Johnson (JNJ)
- McDonald's (MCD)
- The Walt Disney Company (DIS)
- American Express (AXP)
- Dow Chemical (DOW)
- Texas Instruments (TXN)
- Minnesota Mining & Manufacturing (MMM)
- Xerox (XRX)
- Black & Decker (SWK)
In February 2008, Wall Street giant UBS devised the New Nifty 50, an expanded version of the list that included international companies like British Petroleum (BP) and Vodafone Group (VOD). The inclusion of international companies on the New Nifty 50 drew attention to the solid returns and stability of companies in the U.K., Japan and emerging markets.
The Other Nifty 50
Today, the Nifty 50 has meaning in the investment world beyond the popular large-cap stocks of the 1960s and 1970s. It's also the name of a stock index on the National Stock Exchange of India (NSE).
In India, the NIFTY 50 is an index diversified across 13 sectors of the nation's economy: financial services, information technology, consumer goods, oil and gas, automobiles, telecommunications, construction, pharmaceuticals, metals, power, cement and cement products, fertilizers and pesticides, and media and entertainment.
Other stock indices with "NIFTY" in the name include:
- Broad-based indices such as the NIFTY 50, NIFTY NEXT 50 and the NIFTY 100.
- Sector-based indices such as NIFTY Auto, NIFTY Media, NIFTY Pharma and NIFTY Realty.
- Theme-based indices such as NIFTY Commodities, NIFTY Infrastructure and NIFTY Mid-Cap Liquid 15.
- Strategy-based indices such as NIFTY 50 Arbitrage, NIFTY 50 Dividend Points, NIFTY High Beta 50.