VIVEK COLLEGE OF COMMERCE

UNIVERSITY OF MUMBAI
PROJECT ON
NIFTY FIFTY

SUBMITTED BY
KINJAL R BHADRESHWARA
T. Y. B. COM. (FINANCIAL MARKETS)

SEMESTER VI
ACADEMIC YEAR 2013-14

PROJECT GUIDE
DEBJANI CHAKRABORTI

VIVEK EDUCATION SOCIETYS

VIVEK COLLEGE OF COMMERCE
SIDDHARTH NAGAR GOREGAON (WEST)
MUMBAI - 400104.
NIFTY_FIFTY
Page 1

VIVEK COLLEGE OF COMMERCE

CERTIFICATE

I, Debjani Chakraborti, hereby certify that Kinjal R Bhadreshwara of Third

Year Bachelor of Commerce (Financial Markets), Vivek College of
Commerce, Has successfully completed project on Establishment And
Growth of NSE in Semester VI of the academic year 2013-14

Internal Examiner

Co-ordinator

NIFTY_FIFTY
Page 2

External Examiner

Principal

VIVEK COLLEGE OF COMMERCE

DECLARATION

I, Kinjal R Bhadreshwara, student of Bachelor of Commerce (Financial

Markets)Semester VI , Vivek College of Commerce, hereby declare that I
have completed the project on Establishment and Growth of NSE in the
academic year 2013-14.

The information submitted is true and original to the best of my knowledge.

Signature
Kinjal R Bhadreshwara

NIFTY_FIFTY
Page 3

Date

VIVEK COLLEGE OF COMMERCE

Acknowledgement
To list who all helped me is difficult because they are so numerous and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channel and
fresh dimension in the completion of this project.
I take this opportunity to thank the University of Mumbai for giving me
chance to do this project.
I would like to thank my principal, Dr. Nandita Roy, for providing the
necessary facilities required for completion of this project.
I take this opportunity to thank our co-ordinator Mrs. Debjani Chakraborti
for his moral support and guidance.
I would also like to express my sincere gratitude towards my project guide
Debjani Chakraborti whose guidance and care made the project successful.
I would like to thank my college library, for having provided various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project, especially my parents
and my peers who supported me throughout my project.

NIFTY_FIFTY
Page 4

VIVEK COLLEGE OF COMMERCE

Kinjal R Bhadreshwara
EXECUTIVE SUMMARY
S&P CNX Nifty, also called the Nifty 50 or simply the Nifty, is a stock
market index, and one of several leading indices for large companies which
are listed on National Stock Exchange of India.[1], index based derivatives
and index funds.
Nifty is owned and managed by India Index Services and Products
Ltd. (IISL), which is a joint venture between NSE and CRISIL(Credit Rating
and Information Services of India Ltd). (IISL) is India's first specialized
company focused upon the index as a core product. IISL has a marketing
and licensing agreement with Standard & Poor's for co-branding equity
indices. 'CNX' in its name stands for 'CRISIL NSE Index'.

NIFTY_FIFTY
Page 5

VIVEK COLLEGE OF COMMERCE

INDEX
S. N.
1)

Content
Chapter- 1
Introduction

Page no
8

History of Nifty
2)

3)

4)

15

Chapter-2
Securities Listed in Nifty
Promoters

17
19

Chapter-3
Eligibility Criteria
NSE Mission
Envisioned Mission

21
24
25

Chapter-4
NSE Products
NSE Indices

31
32

5)

Conclusion

6)

Bibliography

CHAPTER-1
INTRODUCTION

NIFTY_FIFTY
Page 6

VIVEK COLLEGE OF COMMERCE

The S&P CNX Nifty is the headline index on the National Stock Exchange
of India Ltd. (NSE). The Index tracks the behavior of a portfolio of blue
chip companies, the largest and most liquid Indian securities. It includes 50
of the approximately 1430 companies listed on the NSE, captures
approximately 65% of its float-adjusted market capitalization and is a true
reflection of the Indian stock market.

The S&P CNX Nifty covers 21 sectors of the Indian economy and offers
investment managers exposure to the Indian market in one efficient
portfolio. The Index has been trading since April 1996 and is well suited for
benchmarking, index funds and index based derivatives.

Partnership :The S&P CNX Nifty is owned and managed by India Index Services
and Products Ltd. (IISL), which is a joint venture between the NSE and
CRISIL. IISL is Indias first specialized company focused on an index as a
core product. IISL has a licensing and marketing agreement with Standard &
Poors, who is a world leader in index services.

Highlights :The S&P CNX Nifty is a 50 stock, float-adjusted market-capitalization

weighted index for India, accounting for 21 diversified sectors of the
economy. It is used for a variety of purposes, such as benchmarking fund
NIFTY_FIFTY
Page 7

VIVEK COLLEGE OF COMMERCE

portfolios, index based derivatives and index funds. The S&P CNX Nifty is
derived from economic research and is created for those interested in
investing and trading in Indian equities.

Market Representation. :The S&P CNX Nifty stocks represent about 65% of the total float-adjusted
market capitalization of the National Stock Exchange (NSE).

Diversification. :The S&P CNX Nifty is a diversified index, accurately reflecting the overall
market. The reward-to-risk ratio of S&P CNX Nifty is higher than other
leading indices, offering similar returns but at lesser risk.

Liquidity. :Market impact cost is the best measure of the liquidity of a stock. It
accurately reflects the costs faced when actually trading an index. For
a stock to qualify for inclusion in the S&P CNX Nifty, it has to
reliably have market impact cost below 0.50 %, when doing S&P
CNX Nifty trades of Rupees (Rs) 20 million. The current impact cost
of the S&P CNX Nifty for a portfolio size of Rs 20 million is 0.13%.

Hedging Effectiveness.The basic risk of the S&P CNX Nifty futures is lower than other index
portfolios, due to the liquidity of the S&P CNX Nifty constituent stocks and
of the NSE. In addition, the S&P CNX Nifty has higher correlations with
NIFTY_FIFTY
Page 8

VIVEK COLLEGE OF COMMERCE

typical investment portfolios in India, compared to other indices. These two

factors allow for effective hedging of the Index.

Index Family:S&P CNX Defty. The S&P CNX Defty is a U.S. dollar-denominated index
based on the S&P CNX Nifty. This index was developed to provide a
benchmark of Indian stocks to international investors, providing them with
an instrument for measuring returns on their equity investment in dollar
terms. This ensures that the risk arising out of currency fluctuation is
covered through the S&P CNX Defty.

Nifty Fifty:-

NIFTY_FIFTY
Page 9

VIVEK COLLEGE OF COMMERCE

This article refers to an informal investing term. For the Indian stock
index, see S&P CNX Nifty. For the motor scooter, see the Honda Spree. For
the Canon lens, see EF 50mm f/1.8 II.
Nifty Fifty was an informal term used to refer to 50 popular large cap stocks
on the New York Stock Exchange in the 1960s and 1970s that were widely
regarded as solid buy and hold growth stocks.
The fifty are credited with propelling the bull market of the early 1970s.
Most are still solid performers, although a few are now defunct or otherwise
worthless.
The long bear market of the 1970s that lasted until 1982 caused
valuations of the nifty fifty to fall to low levels along with the rest of the
market, with most of these stocks under-performing the broader market
averages. A notable exception was Wal-Mart, the best performing stock on
the list, with a 29.65% compounded annualized return over a 29 year period.
Because of the under-performance of most of the nifty fifty list, it is often
cited as an example of unrealistic investor expectations for growth stocks.
However, those who held on until the late 1990s bull market saw many of
the stocks return to market valuations.

Characteristics:-

NIFTY_FIFTY
Page 10

VIVEK COLLEGE OF COMMERCE

The stocks were often described as "one-decision", as they were viewed as

extremely stable, even over long periods of time.
The most common characteristic by the constituents were solid earnings
growth for which these stocks were assigned extraordinary high priceearnings ratios. Fifty times earnings was not uncommon.
NIFTY means National Index for Fifty

Eligibility Criteria:Selection of the index set is based on the following criteria:

Liquidity (Impact Cost)
Float-Adjusted Market Capitalization
Float
Domicile
Eligible Securities
Other Variables

Liquidity:For inclusion in the index, the security should have traded at an average
impact cost of 0.50 % or less during the last six months, for 90% of the
observations. Impact cost is the cost of executing a transaction in a security
in proportion to its index weight, measured by market capitalization at any
point in time. This is the percentage mark up suffered while buying/selling
the desired quantity of a security compared to its ideal price -- (best buy +
best sell)/2.

NIFTY_FIFTY
Page 11

VIVEK COLLEGE OF COMMERCE

Float-Adjusted Market Capitalization:Companies eligible for inclusion in the S&P CNX Nifty must have at least
twice the float-adjusted market capitalization of the current smallest index
constituent.

Float:Companies eligible for inclusion in the S&P CNX Nifty should have at least
10% of its stock available to investors (float). For this purpose, float is
stocks which are not held by the promoters and associated entities (where
identifiable) of such companies.

Domicile:The company must be domiciled in India and trade on the NSE.

Eligible Securities:All common shares listed on the NSE (which are of equity and not of a
fixed income nature) are eligible for inclusion in the S&P CNX Nifty index.
Convertible stock, bonds, warrants, rights, and preferred stock that provide a
guaranteed fixed return are not eligible.

NIFTY_FIFTY
Page 12

VIVEK COLLEGE OF COMMERCE

Other Variables:A company which comes out with an IPO is eligible for inclusion in the
index if it fulfills the normal eligibility criteria for the index impact cost,
float-adjusted market capitalization and float -- for a three-month period
instead of a six-month period.

Timing of Changes:The index is reviewed semi-annually, and a six-week notice is given to the
market before making any changes to the index constituents.

Additions :The complete list of eligible securities is compiled based on the float
adjusted market capitalization criteria. After that, the liquidity (impact cost)
and float adjustment filters are applied to them, respectively. The top
ranking companies form the replacement pool. The top stocks, in terms of
size (float-adjusted market capitalization) are, then, identified for inclusion
in the index from the replacement pool.

Deletions :Stocks may be deleted due to mergers, acquisitions or spin-offs. Otherwise,

as noted above, twice a year a new eligible stock list is drawn up to review
against the current constituents. If this new list warrants changes in the
existing constituent list, then the smallest existing constituents are dropped
in favor of the new additions.

NIFTY_FIFTY
Page 13

VIVEK COLLEGE OF COMMERCE

Index Construction
Approaches
The S&P CNX Nifty is computed using a float-adjusted, market
capitalization weighted methodology*, wherein the level of the index
reflects the total market value of all the stocks in the index relative to a
particular base period. The methodology also takes into account constituent
changes in the index and corporate actions such as stock splits, rights
issuance, etc., without affecting the index value.

HISTORY :Below we have made up what we believe is the modern Nifty 50

based on the original nifty 50 and also adding in some exposure to banking,
energy, technology & Internet. The Nifty 50 Best Stock Picks dates back to
the 1960s and 1970s. The Nifty 50 Best Stock Picks are composed mostly
of large-cap blue-chip that outperformed the market during that era. The
underlining belief is that companies that are market leaders and have strong
brands will continue to outperform the market over the long run and be safer
investments.

NIFTY_FIFTY
Page 14

VIVEK COLLEGE OF COMMERCE

NYSE Nifty Fifty constituents : NYSE

American Home Products
American ly Corp.
AMP Inc.
Anheuser-Busch
Avon Products
Baxter International
Black & Decker
Bristol-Myers
Burroughs Corporation
Chesebrough-Ponds
The Coca-Cola Company
Digital Equipment Corporation
Dow Chemical
Eastman Kodak
Eli Lilly and Company
Emery Air Freight
NIFTY_FIFTY
Page 15

VIVEK COLLEGE OF COMMERCE

First National City Bank

General Electric
Gillette
Halliburton
Heublein Brewing Company
IBM
International Flavors and Fragrances
International Telephone and Telegraph
J.C. Penney
Johnson & Johnson
Louisiana Land and Exploration
Lubrizol
Minnesota Mining and Manufacturing (3M)
McDonald's
Merck & Co.
MGIC Investment Corporation
PepsiCo
Pfizer
Philip Morris Cos.
NIFTY_FIFTY
Page 16

VIVEK COLLEGE OF COMMERCE

Polaroid
Procter & Gamble
Revlon
Schering Plough
Joe Schlitz Brewing
Schlumberger
Sears, Roebuck and Company
Simplicity Pattern
Squibb
S.S. Kresge
Texas Instruments
Upjohn
The Walt Disney Company

NIFTY_FIFTY
Page 17

VIVEK COLLEGE OF COMMERCE

CHAPTER 2
SECURITIES LISTED IN NIFTY FIFTY

S. N.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
NIFTY_FIFTY
Page 18

SCRIPTS
ALLAHABAD BANK
ANDHRA BANK
ALSTOM PROJECTS INDIA LTD
ASHOK LEYLAND LTD
AUROBINDO PHARMA LTD
BAJAJ HINDUSTAN LTD
BEML LIMITED
CESC LTD
CHENNAI PETROLEUM CORP LT
CUMMINS INDIA LTD
DIVIS LABORATORIES LTD
EDUCOMP SOLUTIONS LTD
THE GE SHPG.LTD
GVK POW. & INFRA LTD.
HINDUSTAN CONSTRUCTION CO
HOTEL LEELA VENTURES LTD
IDBI BANK LIMITED
THE INDIAN HOTELS CO. LTD
THE INDIA CEMENTS LIMITED
INDIAN BANK
IVRCL INFRAST & PROJ LTD.
JSW STEEL LIMITED
LANCO INFRATECH LTD.
LUPIN LIMITED
MOSER-BAER (I) LTD
MPHASIS LIMITED
MAHANAGAR TELEPHONE NIGAM
NAGARJUNA CONSTRN. CO. LT

VIVEK COLLEGE OF COMMERCE

29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

NIFTY_FIFTY
Page 19

ORACLE FIN SERV SOFT LTD.

PATEL ENGINEERING LTD.
PETRONET LNG LIMITED
PIRAMAL HEALTHCARE LTD
PRAJ INDUSTRIES LTD
PUNJ LLOYD LIMITED
REL. NAT. RESOURCES LTD.
ROLTA INDIA LTD
SHIPPING CORP OF INDIA LT
SINTEX INDUSTRIES LTD
STERLING BIOTECH LTD
SYNDICATE BANK
TATA CHEMICALS LTD
TATA TEA LTD
TECH MAHINDRA LIMITED
TITAN INDUSTRIES LTD
TATA TELESERV(MAHARASTRA)
ULTRATECH CEMENT LIMITED
UNITED PHOSPHORUS LIMITED
VIJAYA BANK
VOLTAS LTD
WELSPUN GUJ ST. RO. LTD.

VIVEK COLLEGE OF COMMERCE

Promoters of Nifty Fifty:S&P CNX Nifty is a well-diversified 50 stock index accounting for 23
sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index based derivatives, structured products,
ETFs and index funds. S&P CNX Nifty is based upon solid economic
research and is well respected internationally as a pioneering effort in better
understanding how to make a stock market index.

Highlights:S&P CNX Nifty is owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL.
IISL is Indias first specialized company focused upon the index as a core
product. IISL has a licensing and marketing agreement with Standard and
Poors (S&P), who are world leaders in index services.

Market Representation:S&P CNX Nifty stocks represent about 66.96% of the total free float market
capitalization of the universe of the stocks traded on NSE as on June 29,
2012.

Diversification:S&P CNX Nifty is a diversified index, accurately reflecting overall market

conditions. The reward to-risk ratio of S&P CNX Nifty is higher than other
NIFTY_FIFTY
Page 20

VIVEK COLLEGE OF COMMERCE

leading indices, making it a more attractive portfolio hence offering similar

returns, but at lesser risk.

Liquidity:Market impact cost is the best measure of the liquidity of a stock. It

accurately reflects the costs faced when actually trading an index. For a
stock to qualify for possible inclusion into the S&P CNX Nifty, it has to
reliably have market impact cost of below 0.50 % when doing S&P CNX
Nifty trades of Rs. 20 million.

NIFTY_FIFTY
Page 21

VIVEK COLLEGE OF COMMERCE

CHAPTER 3
Eligibility Criteria for Selection of Constituent Stocks

The constituents and the criteria for the selection judge the effectiveness of
the index. S&P CNX Nifty is unique in this respect. Selection of the index
set is based on 3 criteria:
Liquidity
Floating Stock
Others

Liquidity:For inclusion in the index, the security should have traded at an average
impact cost of 0.50% or less during the last six months for 90% of the
observations, for the basket size of Rs. 20 Million. Impact cost is cost of
executing a transaction in a security in proportion to the weightage of its
market capitalization as against the index market capitalization at any point
of time. This is the percentage mark up suffered while buying / selling the
desired quantity of a security compared to its ideal price
= (best buy + best sell) /2

NIFTY_FIFTY
Page 22

VIVEK COLLEGE OF COMMERCE

Floating Stock :The companies eligible for inclusion in the S&P CNX Nifty Index should
have free float of at least 10%. Free float factor (Investible Weight Factor
IWF) for each company in the index will be determined based on the public
shareholding of the companies as disclosed in the shareholding pattern
submitted to the stock exchanges by these companies on a quarterly basis.
Promoters holding, government holding in case of public sector
undertaking, shares held by promoters through ADRs/ GDRs, associate
companies, employee welfare trusts, strategic stakes by corporate bodies,
investments under Foreign Direct Investment (FDI) category (where
identifiable) and public lock-ins are subtracted to arrive at Free Float factor.

Others:A company which comes out with an IPO will be eligible for inclusion in
the index, if it fulfills the normal eligibility criteria for the index like impact
cost, market capitalization and free float, for a 3 month period.

Method of Computation:S&P CNX Nifty is computed using free float market capitalization method,
wherein the level of the index reflects the total free float market value of all
the stocks in the index relative to a particular base market capitalization
value. The method also takes into account constituent changes in the index
and importantly corporate actions such as stock splits, rights, new issue of
shares etc. without affecting the index value. Base Date and Value The base
period selected for S&P CNX Nifty index is the close of prices on
November 3, 1995, which marks the completion of one year of operations.
The value of the index has been set at 1000 and a base capital of Rs.2.06
trillion.
NIFTY_FIFTY
Page 23

VIVEK COLLEGE OF COMMERCE

Index Governance:A professional team at IISL, a company setup by NSE and CRISIL manages
S&P CNX Nifty. There is a three-tier governance structure comprising the
Board of Directors of IISL, the Index Policy Committee, and the Index
Maintenance Sub-Committee.

NIFTY_FIFTY
Page 24

VIVEK COLLEGE OF COMMERCE

NSE MISSION

i)

MISSION STATEMENT :-

The National Student Exchange (NSE) is a not-for-profit, membership

consortium of accredited, four-year colleges and universities in the United
States, its territories, and Canada which have joined together for the purpose
of sharing their educational resources and exchanging students among its
member institutions.
The only program of its kind offering tuition reciprocal exchanges across the
United States and Canada, NSE serves as the national resource for interinstitutional study opportunities.
NSE offers study opportunities at diverse university settings and provides
access to a wide array of courses and programs; field experiences, co-op,
and internship options; and resident assistant, honors, and study abroad
experiences.
NSE is administered by a central office staff and governed by a Council
elected from within the membership. Funding comes from institutional
membership fees and student application fees.
NSE, with a reputation for quality service, maintains a strong and viable
consortium through continuous communication and on-going assessment of
the needs and interests of the membership.

NIFTY_FIFTY
Page 25

VIVEK COLLEGE OF COMMERCE

ii)

ENVISIONED FUTURE :-

The National Student Exchange will be recognized as the premier network

of U.S. and Canadian colleges and universities which provides service to
both institutions and their students.
Institutions will seek membership in order to access both the services of
NSE for their students and the resources of the entire network.
NSE will be identified as the model for higher education networking and
resource sharing world-wide.
Through NSE, member campuses will build cooperative programs that will
make access and quality the hallmarks of their memberships.
The position of NSE coordinator will be respected and recognized nationally
as a trained professional who abides by the Principles of Professional
Practice for NSE Coordinators and provides quality service to students, peer
coordinators, and member universities.

iii)

METHOD OF COMPUTATION

S&P CNX Nifty is computed using market capitalization weighted method,

wherein the level of the index reflects the total market value of all the stocks
in the index relative to a particular base period. The method also takes into
account constituent changes in the index and importantly corporate actions
NIFTY_FIFTY
Page 26

VIVEK COLLEGE OF COMMERCE

such as stock splits, rights, etc without affecting the index value.

iv)

BASE DATE AND VALUE :-

The base period selected for S&P CNX Nifty index is the close of prices
on November 3, 1995, which marks the completion of one year of
operations of NSE's Capital Market Segment. The base value of the index
has been set at 1000 and a base capital of Rs.2.06 trillion.
Criteria for Selection of Constituent Stocks
The constituents and the criteria for the selection judge the effectiveness of
the index. Selection of the index set is based on the following criteria:
Liquidity (Impact Cost)
For inclusion in the index, the security should have traded at an average
impact cost of 0.50% or less during the last six months for 90% of the
observations for a basket size of Rs. 2 Crores.
Impact cost is cost of executing a transaction in a security in proportion to
the weight age of its market capitalization as against the index market
capitalization at any point of time. This is the percentage mark up suffered
while buying / selling the desired quantity of a security compared to its
ideal price (best buy + best sell) / 2

v)

FLOATING STOCK :-

Companies eligible for inclusion in S&P CNX Nifty should have atleast
10% floating stock. For this purpose, floating stock shall mean stocks which
are not held by the promoters and associated entities (where identifiable) of
such companies.
NIFTY_FIFTY
Page 27

VIVEK COLLEGE OF COMMERCE

a) A company which comes out with a IPO:A company which comes out with a IPO will be eligible for inclusion in the
index, if it fulfills the normal eligibility criteria for the index like impact
cost, market capitalization and floating stock, for a 3 month period instead of
a 6 month period.

b) Replacement of Stock from the Index:A stock may be replaced from an index for the following reasons:
Compulsory changes like corporate actions, delisting etc. In such a scenario,
the stock having largest market capitalization and satisfying other
requirements related to liquidity, turnover and free float will be considered
for inclusion.
When a better candidate is available in the replacement pool, which can
replace the index stock i.e. the stock with the highest market capitalization in
the replacement pool has at least twice the market capitalization of the index
stock with the lowest market capitalization.
With respect to (2) above, a maximum of 10% of the index size (number of
stocks in the index) may be changed in a calendar year. Changes carried out
for (2) above are irrespective of changes, if any, carried out for (1) above.

vi)

Index Maintenance:-

Rebalancing Index maintenance plays a crucial role in ensuring the stability

of the index, as well as in meeting its objective of being a consistent
benchmark of the Indian equity markets. IISL has constituted an Index
Policy Committee, which is involved in the policy and guidelines for
managing the S&P CNX Nifty. The Index Maintenance Subcommittee
NIFTY_FIFTY
Page 28

VIVEK COLLEGE OF COMMERCE

makes all decisions on additions and deletions of companies in the index.

Changes in the index level reflect changes in the market capitalization of the
index which are caused by stock price movements in the market. They do
not reflect changes in the market capitalization of the index, or of the
individual stocks, that are caused by corporate actions such as dividend
payments, stock splits, and distributions to shareholders, mergers, or
acquisitions.

vii) Calculation Frequency. :The index is calculated real-time on all days that the National Stock
Exchange of India is open. Corporate Actions and Share Updates
Maintaining the S&P CNX Nifty index includes monitoring and completing
the adjustments for company additions and deletions, share changes, stock
splits, stock dividends, and stock price adjustments due to restructurings or
spin-offs. Some corporate actions, such as stock splits and stock dividends,
require simple changes in the common shares outstanding and the stock
prices of the companies in the index. Other corporate actions, such as share
issuances, change the market value of an index and require a divisor
adjustment to prevent the value of the index from changing. Adjusting the
divisor for a change in market value leaves the value of the index unaffected
by the corporate action. Divisor adjustments are made after the close of
trading and after the calculation of the closing value of the index. Any
change in the index divisor also affects corresponding sub-indices and
divisors.
Each sub-index is maintained in the same manner as the headline
index. Corporate actions such as splits, stock dividends, spin-offs, rights
offerings, and share changes are applied on the ex-date. All singular
instances of share changes arising out of additional issue of capital, such as
ESOPs, QIPs, ADR/GDR issues, private placements, warrant conversions,
and FCCB conversions, which have an impact of 5% or more on the issued
share capital of the security, are implemented after providing a five days
notice period. Share repurchase (buyback) also have the same rules as
NIFTY_FIFTY
Page 29

VIVEK COLLEGE OF COMMERCE

applicable to share changes. Changes entailing less than 5% impact on the

issued share capital are accumulated and implemented on a monthly basis.
Where cumulative share changes exceed 5% of the issued share capital
within a month, such changes are implemented after providing five days
notice period, from the date when such cumulative changes exceeded 5%.
Currency of Calculation for the S&P CNX Nifty, all prices are in Indian
rupees.
Base Date:The base period for the S&P CNX Nifty index is November 3, 1995,
which marked the completion of one year of operations of NSE's Capital
Market Segment. The base value of the index has been set at 1000, and a
base capital of Rs 2.06 trillion.
Index Maintenance plays a crucial role in ensuring stability of the Index as
well as in meeting its objective of being a consistent benchmark of the
equity markets.
IISL has constituted an Index Policy Committee, which is involved in policy
and guidelines for managing the CNX Indices. The Index Maintenance Subcommittee takes all decisions on addition/ deletion of companies in any
Index.
The index is reviewed every six months (on half-yearly basis) and a six
weeks notice is given to the market before making changes to the index set.

Hedging Effectiveness :Exhaustive calculations have been carried out to determine the hedging
effectiveness of the 50-security index S&P CNX NIFTY against numerous
randomly chosen equally-weighted portfolios of different sizes varying from
NIFTY_FIFTY
Page 30

VIVEK COLLEGE OF COMMERCE

1 to 100 of small cap, midcap and large cap companies as well as many
industry indices/sub-indices provided by CMIE. It was observed that the
correlation (R2) for various portfolios and indices using monthly returns
data on the S&P CNX Nifty vis-a-vis other indices was significantly higher
indicating that the S&P CNX Nifty had higher hedging effectiveness.

Trading in Nifty :The National Stock Exchange of India Limited (NSE) commenced trading in
derivatives with index futures on June 12, 2000. The futures contracts on
NSE are based on S&P CNX Nifty. The Exchange later introduced trading
on index options based on Nifty on June 4, 2001.
The turnover in the derivatives segment has shown considerable growth in
the last year, with NSE turnover accounting for 60% of the total turnover in
the year 2000-2001. Further details on index based derivatives are available
under the Derivatives (F&O) section of the website.

Total Returns Index:S&P CNX Nifty reflects the return one would get if investment is made in
the index portfolios. As Nifty is computed in real-time, it takes into account
only the price movements. However, the price indices do not consider the
return from dividend payments of index constituent stocks. Only the capital
gains due to price movement is measured by the price index. In order to get
a true picture of returns, the dividends received from the index constituent
stocks also needs to be included in the index movement. Such an index,
which includes the dividends received, is called the Total Returns Index.

NIFTY_FIFTY
Page 31

VIVEK COLLEGE OF COMMERCE

The Total Returns Index is an index to reflect the returns on the index from
index gain/loss plus dividend payments by constituent index stocks.
CHAPTER 4
NSE PRODUCTS

1) Equities
i) Equities
ii) Indices
iii) Mutual Funds
iv) Exchange Traded Funds
v) Initial Public Offerings
vi) Security Lending and Borrowing Scheme

2) Derivatives
i) Equity Derivatives
ii) Currency Derivatives
iii) Interest Rate Futures

3) Debt
i) Retail Debt Market
ii) Corporate Bonds

NIFTY_FIFTY
Page 32

VIVEK COLLEGE OF COMMERCE

1) Equities:i) Equities
The securities market has two interdependent and inseparable segments, the
new issues (primary) market and the stock (secondary) market. The primary
market provides the channel for creation and sale of new securities, while
the secondary market deals in securities previously issued. The Stock market
or Equities market is where listed securities are traded in the secondary
market currently more than 1300 securities are available for trading on the
Exchange.

ii) Indices
Nifty Sparklines
The S&P CNX Nifty is a well diversified 50 stock index accounting for 22
sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index and index funds.
S&P CNX Nifty is owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL.
IISL is Indias first Tpecialized company focused upon the index as a core
product. IISL has a Marketing and licensing agreement with Standard &
Poors (S&P), who are world leaders in index services.
The S&P CNX Nifty Index represents about 66.90% of the free float market
capitalization of the stocks listed on NSE as on December 30, 2011.
The total traded value for the last six months of all index constituents is
approximately 56.58% of the traded value of all stocks on the NSE.
NIFTY_FIFTY
Page 33

VIVEK COLLEGE OF COMMERCE

Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 lakhs is
0.08%.
S&P CNX Nifty is professionally maintained and is ideal for derivatives
trading
From June 26, 2009, S&P CNX Nifty is computed based on free float
methodology
A stock market index is a measure of the relative value of a group of stocks
in numerical terms. As the stocks within an index change value, the index
value changes. An index is important to measure the performance of
investments against a relevant market index.

iii) Initial Public Offerings (IPOs)

A primary market is one that issues new securities on an exchange. The
primary markets are where investors can get first crack at a new security
issuance. The issuing company offers its equity to investors or groups and
receives cash proceeds from the sale, which is then used to fund operations
or expand the business. It is the largest source of funds with long or
indefinite maturity for the company.

iv) Security Lending and Borrowing Scheme (SLBS)

Short Selling means selling of a stock that the seller does not own at the time
of trade. Short selling can be done by borrowing the stock through Clearing
Corporation/Clearing House of a stock exchange which is registered as
Approved Intermediaries (Ais). Short selling can be done by retail as well as
institutional investors. The Securities Lending and Borrowing mechanism
allows short sellers to borrow securities for making delivery.
NIFTY_FIFTY
Page 34

VIVEK COLLEGE OF COMMERCE

2)Derivatives:i) Equities Derivatives

Equity derivative is a class of derivatives whose value is at least partly
derived from one or more underlying equity securities. Options and futures
are by far the most common equity derivatives. This section provides you
with an insight into the daily activities of the equity derivatives market
segment on NSE. 2 major products under Equity derivatives are Futures and
Options, which are available on Indices and Stocks.

ii) Currency Derivatives

Foreign exchange rates, like any other asset class move depending on
various factors, like demand supply, interest rate parity, trade and capital
flows, speculators taking positions, clients hedging risk arising from their
trade and capital flows etc.
Based on the evolving needs of the market place, NSE introduced trading in
exchange traded Currency Derivatives contracts on August 29, 2008. NSE
launched USDINR contracts in currency derivatives segment. The product
had an impressive debut and has shown consistent growth since inception.
Within the span of a year and half the volume crossed the mark of USD 4.3
billion.
In the context of growing integration of the Indian economy with the rest of
the world and a continuous demand for currency derivatives in other
currencies, Securities Exchange Board of India and Reserve Bank of India
have permitted trading in futures contracts on new currency pairs.NSE
therefore now introduces trading in currency futures based on Euro (EUR)NIFTY_FIFTY
Page 35

VIVEK COLLEGE OF COMMERCE

INR, Pound Sterling (GBP) - INR and Japanese Yen (JPY) - INR exchange
rates in addition to the existing USDINR contracts.

iii) Interest Rate Derivative

NSE launched trading in Interest Rate Futures from 30th August 2009. The
underlying instrument is a Notional 10 year 7% coupon bearing Government
of India (GOI) security.
Interest Rate Futures contract offers market participants a standardized
product taking a view of the future directions of the market, hedging and
creating income strategies. Electronic trading platform of NSE ensures
transparency of prices, volumes and trade data.

3)Debt:-

i) Retail Debt Market

ii) Corporate bonds

NIFTY_FIFTY
Page 36

VIVEK COLLEGE OF COMMERCE

Index Data: Total Return

The S&P CNX Nifty reflects the return one would get if an investment is
made in the index portfolio. As the S&P CNX Nifty is computed in realtime, it takes into account only the stock price movements. However, the
price indices do not consider the return from dividend payments of index
constituent stocks. Only the capital gains and losses due to price movement
are measured by the price index. In order to get a true picture of returns, the
dividends received from the index constituent stocks also need to be
included in the index movement. Such an index, which includes the
dividends received, is called the total return index.
The total return index reflects the returns on the index from stock prices
fluctuation plus dividend payments by constituent index stocks.

Hedging Effectiveness
The S&P CNX Nifty has been tested against numerous randomly chosen,
equally weighted portfolios of different sizes, varying from 1-to-100 small,
mid and large cap companies, as well as many industry indices/sub-indices
provided by CMIE, for hedging effectiveness. Using monthly returns data, it
was observed that the correlation (R2) for various portfolios and indices on
the S&P CNX Nifty was significantly higher than other benchmark indices,
indicating that the S&P CNX Nifty had higher hedging effectiveness.
Trading in derivative contracts based on S&P CNX Nifty
NIFTY_FIFTY
Page 37

VIVEK COLLEGE OF COMMERCE

The National Stock Exchange of India Limited (NSE) commenced trading in

derivatives with index futures on June 12, 2000. The futures contracts on
the NSE are based on the

Index Committee
A professional team at IISL, a company setup by NSE and CRISIL, manages
the S&P CNX Nifty. There is a three-tier governance structure comprising
the board of directors of IISL, the Index Policy Committee, and the Index
Maintenance Subcommittee. IISL has constituted the Index Policy
Committee, which is involved in the policy and guidelines for managing the
S&P CNX Nifty. The Index Maintenance Sub-committee makes all
decisions on additions and deletions of companies in the Index. The S&P
CNX Nifty has fully articulated and professionally implemented rules
governing index revisions, corporate actions, etc. These rules are carefully
considered, using Indian market conditions, to dovetail with operational
problems of index funds and index arbitrageurs.

Index Policy
The S&P CNX Nifty uses transparent, researched and publicly documented
rules for index maintenance. These rules are applied regularly to manage
changes to the index.
Index reviews are carried out semi-annually to ensure that each security in
the index fulfills eligibility criteria.

Announcements
All index-related announcements are posted on the NSE Web site. Changes
impacting the constituent list are also posted on the Web site.
NIFTY_FIFTY
Page 38

VIVEK COLLEGE OF COMMERCE

Please refer to the NSE Web site at www.nseindia.com

Holiday Schedule, for the calculation of indices, the IISL follows the official
holiday schedule. A complete holiday schedule for the year is available on
the NSE Website. Please refer to the NSE Web site at www.nseindia.com

Real-Time Calculation
The indices are calculated real-time whenever there is a change in price. A
security is traded in full accordance with the present methodology. The best
bid price of a security exceeds the last calculated price of the security. The
best ask price of a security is less than the last calculated price of the
security.

Index Precision
The level of precision for index calculation is as follows:
Index values are published rounded to two decimal places.
Share prices are rounded to two decimal places.
Shares outstanding are expressed in units.
Float-adjusted market capitalization is stated to two decimal places.
Index values are calculated to two decimal places.
Final settlement prices are published rounded to two decimal places.

NIFTY_FIFTY
Page 39

VIVEK COLLEGE OF COMMERCE

Index Dissemination: Tickers

Index Bloomberg Reuters
S&P CNX Nifty NIFTY .NSEI
Web site
Daily index values, index constituents, methodology, and special
announcements are available on the NSE Web site at www.nseindia.com.
Appendix

Index Calculations Formulas

The S&P CNX Nifty index is computed by dividing the float-adjusted
market capitalization of the index component securities as of current date
(MCn) by the float adjusted market capitalization of the same securities as of
initial date (MC1) multiplied by the index value as of initial date (I1):
In = (I1 *MCn)/MC1
Exchange rate at time
The U.S. dollar/Rupee exchange rate is based on a real-time polled
indicative data feed, which contains bid/ask rates at a point in time. The
polled data is sourced from Thomson Reuters. The data is polled from
market participants, including leading nationalized banks, private Indian
banks and foreign exchange brokers. The frequency of polled data is more

NIFTY_FIFTY
Page 40

VIVEK COLLEGE OF COMMERCE

than 3-4 updates per minute, depending on market volatility, totaling more
than 1000 updates in a day.
The closing value of S&P CNX Defty is computed based on a simple
average of the U.S. dollar/Rupee exchange rates received during the last half
an hour of trading on the National Stock Exchange of India Ltd. (NSE) and
applied to the closing value of the S&P CNX Nifty.
Index Contact Information
S&P Index Management
David M. Blitzer, Ph.D. Managing Director & Chairman of the Index
Committee
david_blitzer@standardandpoors.com +1.212.438.3907
Winnie Wong Manager, Global Indices
winnie_wong@standardandpoors.com +1.212.438.3526
S&P Product Management
Alka Banerjee Vice President, Global Equities
alka_banerjee@standardandpoors.com +1.212.438.3536
India Index Services & Products Limited (IISL)
Suresh Narayan Director & Chief Executive Officer
sureshn@nse.co.in +91.22.26598221
Sammit Joshi Chief Manager
sammitj@nse.co.in +91.22.26598386
S&P Media Relations
David Guarino Communications
NIFTY_FIFTY
Page 41

VIVEK COLLEGE OF COMMERCE

dave_guarino@standardandpoors.com +1.212.438.1471
S&P Index Operations & Business Development
North America
New York Client Services
index_services@standardandpoors.com +1.212.438.2046

Disclaimer
Copyright 2011 by The McGraw-Hill Companies, Inc. Redistribution,
reproduction and/or photocopying in whole or in part is prohibited without
written permission. All rights reserved. S&P and Standard & Poors are
registered trademarks of Standard & Poors Financial Services LLC. This
document does not constitute an offer of services in jurisdictions where
Standard & Poors or its affiliates do not have the necessary licenses.
Standard & Poors receives compensation in connection with licensing its
indices to third parties. All information provided by Standard & Poors is
impersonal and not tailored to the needs of any person, entity or group of
persons. Standard & Poors and its affiliates do not sponsor, endorse, sell,
promote or manage any investment fund or other vehicle that is offered by
third parties and that seeks to provide an investment return based on the
returns of any Standard & Poors index. Standard & Poors is not an
investment advisor, and Standard & Poors and its affiliates make no
representation regarding the advisability of investing in any such investment
fund or other vehicle. A decision to invest in any such investment fund or
other vehicle should not be made in reliance on any of the statements set
forth in this presentation. Prospective investors are advised to make an
investment in any such fund or other vehicle only after carefully considering
the risks associated with investing in such funds, as detailed in an offering
memorandum or similar document that is prepared by or on behalf of the
issuer of the investment fund or other vehicle. Inclusion of a security within
NIFTY_FIFTY
Page 42

VIVEK COLLEGE OF COMMERCE

an index is not a recommendation by Standard & Poors to buy, sell, or hold

such security, nor is it considered to be investment advice.
Standard & Poors does not guarantee the accuracy and/or completeness of
any Standard & Poors index, any data included therein, or any data from
which it is based, and Standard & Poors shall have no liability for any
errors, omissions, or interruptions therein. Standard & Poors makes no
warranties, express or implied, as to results to be obtained from use of
information provided by Standard & Poors and used in this service, and
Standard & Poors expressly disclaims all warranties of suitability with
respect thereto. While Standard & Poors has obtained information believed
to be reliable, Standard & Poors shall not be liable for any claims or losses
of any nature in connection with information contained in this document,
including but not limited to, lost profits or punitive or consequential
damages, even if it is advised of the possibility of same. These materials
have been prepared solely for informational purposes based upon
information generally available to the public from sources believed to be
reliable.
Standard & Poors makes no representation with respect to the accuracy or
completeness of these materials, the content of which may change without
notice. The methodology involves rebalancing and maintenance of the
indices that are made periodically during each year and may not, therefore,
reflect real time information. Analytic services and products provided by
Standard & Poors are the result of separate activities designed to preserve
the independence and objectivity of each analytic process. Standard &
Poors has established policies and procedures to maintain the
confidentiality of non-public information received during each analytic
process. Standard & Poor's and its affiliates provide a wide range of
services to, or relating to, many organizations, including issuers of
securities, investment advisers, broker-dealers, investment banks, other
financial institutions and financial intermediaries, and accordingly may
receive fees or other economic benefits from those organizations, including
NIFTY_FIFTY
Page 43

VIVEK COLLEGE OF COMMERCE

organizations whose securities or services they may recommend, rate,

include in model portfolios, evaluate or otherwise address. Analytic services
and products provided by Standard & Poors are the result of separate
activities designed to preserve the independence and objectivity of each
analytic process.
Standard & Poors has established policies and procedures to maintain the
confidentiality of non-public information received during each analytic
process.

CONCLUTION

This project shows the need of NIFTY 50 stocks for the growth of Indian
securities with par with the international securities market. As NSE has
improved the capital market of India by providing modern technology such
as online trading system such as NOW (NEAT on WEB), NEAT.
Nifty gets various product facilities to investors such as Equities,
Derivatives and Debt. Nifty has been recent development in Cash market,
Derivatives market and Whole sale debt market.
In future Nifty has produced various new products to investors. The
efficiency of National Stock Exchange helps the investors to enter in capital
market easily and also gain confidence of Investors

NIFTY_FIFTY
Page 44

VIVEK COLLEGE OF COMMERCE

BIBILOGRAPHY
Web sites: www.nseindia.com
www.wikipedia.com
www.sebi.com

NIFTY_FIFTY
Page 45