What Is the Standard and Poor's CNX Nifty?

The Standard & Poor's CNX Nifty stock index is a regional stock market index endorsed by Standard & Poor's (S&P) which is composed of 50 of the largest and most liquid stocks found on the National Stock Exchange (NSE) of India. It is commonly used to represent the market for benchmarking Indian investments. Similar to other major stock indexes like the S&P 500, companies must meet certain requirements in terms of market capitalization and liquidity before they can be considered for inclusion in the index.

Key Takeaways

  • The CNX Nifty (or "Nifty Fifty") is a benchmark stock market index that tracks 50 of the largest stocks traded on Indian's National Stock Exchange (NSE).
  • The CNX Nifty competes with the older Sensex index for Indian equities, both of which are sponsored by S&P.
  • Since its launch in the 1990s, the Nifty has surpassed the Sensex in terms of popularity as a benchmark and tradeable product.

Understanding the CNX Nifty

As of April 2017, the stocks in the Standard & Poor's CNX Nifty (also known as the "Nifty 50") represented about 62.9 percent of the free float market capitalization of all stocks in India's stock exchanges. The total traded value of Nifty 50 index constituents for the last six months, ending March 2017, is approximately 43.8 percent of the traded value of all stocks on the NSE. Impact cost of the Nifty 50 for a portfolio size of Rs.50 lakhs is 0.02 percent for the month March 2017.

Nifty 50 Index has become the largest single financial product in India, with an ecosystem, comprising exchange traded funds (onshore and offshore), exchange-traded futures and options (at NSE in India and at SGX and CME abroad), other index funds and OTC derivatives (mostly offshore). The Nifty 50 is ideal for derivatives trading. In fact, it is the world’s most actively traded contract. WFE, IOMA and FIA surveys endorse NSE’s leadership position.

CNX stands for the Credit Rating Information Services of India Limited (CRISIL) and the National Stock Exchange of India (NSE). These two bodies own and manage the index within a joint venture called the India Index Services and Products Ltd. (IISL). IISL is India's specialized company focused upon the index as a core product. Without the additional abbreviation to S&P CNX, the index name would be S&P CRISIL NSE Index.

History and Composition of the Standard & Poor's CNX Nifty

The Nifty 50 comprises 50 diversified stocks in 12 sectors of the Indian economy. It is used for a variety of purposes, including benchmarking fund portfolios and index-based derivatives and index funds. The index was initially calculated on full market capitalization methodology. Since June 26, 2009, the computation has used the free float methodology. The base period for the CNX Nifty index is November 3, 1995, which marked the completion of one year of operations of National Stock Exchange Equity Market Segment. The base value of the index has been set at 1000 and a base capital of Rs 2.06 trillion.

The CNX Nifty vs. Sensex

The other prominent Indian market index is known as the Sensex. Sensex is the oldest market index for equities; it includes shares of 30 firms listed on the Bombay Stock Exchange (BSE), which represent about 45% of the index's free-float market capitalization. It was created in 1986 and provides time series data from April 1979, onward.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in 1994. However, both exchanges follow the same trading mechanism, trading hours, settlement process, etc. At the last count, the BSE had more than 5,000 listed firms, whereas the rival NSE had about 1,600.