Nowadays, so many investment options are available to help people grow their wealth and fulfil their financial objectives. The stock market is an attractive investment option which has the potential to generate higher returns and offers various other exciting benefits. NSE India, a leading financial market provides a safe, transparent and efficient trading platform to investors. Different companies across various sectors are registered with the NSE to raise funds. It allows investors to buy stocks and existing shareholders to sell stocks of the listed companies in a fast and hassle-free manner. NSE manages several different indices, but the most crucial one is NIFTY 50. It is a representational figure comprising 50 top-performing companies of various sectors listed on the NSE.

Why is NSE 50 index important?

1. It is an important tool for gauging the long-term health of the Indian economy.
2. It helps investors to make sound investment decisions after viewing and analysing the performance of Indian companies across various sectors like banking, IT, healthcare, telecommunication etc., on a large scale.

What are the selection criteria for the top 50 companies?

1. Indian companies must be listed on National Stock Exchange. It doesn’t apply to companies listed on other stock exchanges.
2. Trading of the company’s shares should be positive in the F&O segment.
3. It should have a high free-float market capitalisation.
4. The trading volume must be high (High liquidity )

One must note that the rebalancing of this index takes place twice a year to replace the underperforming companies with well-performing ones. This exercise makes sure that the NSE 50 remains an accurate representation of India’s finest companies.

What are the different methods for investing in NIFTY (NSE 50)?

1. Purchase stocks in all these top companies keeping the ratio the same as in NSE 50.
2. Take the route of Index mutual funds investment

The first method of investment is costly and a bit complicated. Retail investors may not have sufficient funds to invest in all the top stocks keeping the ratio the same as the benchmark index. This direct investment method, thus, doesn’t lead to the fulfilment of the set objective. Investors prefer to invest in index funds whose performance remains similar to the NIFTY price movement. The following are the advantages of NIFTY index fund investment-

1. Investors who don’t have a lot of money to invest can still invest in small amounts using the Systematic Investment Plan facilities. It helps inculcate disciplined saving and investing habits.
2. It offers great flexibility to investors as they can change the investment amount as and when they desire.
3. Index funds closely mimic the NSE 50 index. There is, thus, no need for active fund management. This makes the expense ratio lower.
4. Any changes to the NIFTY index due to the rebalancing exercise are automatically incorporated into index funds by the Fund managers.

Conclusion-

After understanding the basics of the stock market, people can begin their investment journey by opening a trading and Demat account with registered stock brokers. 5paisa is among the top discount brokers in India. With its easy-to-use trading app, seasoned investors and beginners can invest in different financial instruments like stocks, mutual funds, bonds etc. It also assists investors in making better decisions by sharing in-depth reports, real-time quotes, the latest business news, investment tips etc.