An In-Depth Guide to Investing in Nifty 50.

What if Nifty?

Nifty 50 is the stock index of the National Stock Exchange (NSE), where 50 is for 50 large capital companies which are the leaders in their sectors.

It is one of the two main stock indices used in India, the other being the BSE SENSEX, launched on 22nd April 1996. 

How is trading done in Nifty?

Trading in Nifty can be done by using the Market-Capitalization-Weighted Index Method.

The base value of 1,000 is used to calculate the Nifty. Then, the market value is divided by the base market capital multiplied by the base value of 1,000 to get the index value of Nifty daily.

In simple terms,

Index Value = Current Market Value divided by 1000 multiplied by its Base Market Capital.

Now that we have understood what Nifty 50 is let’s examine how to distribute our funds. Mutual funds and Derivatives are two ways to invest in the Nifty index.

  1. Trading Nifty via Derivatives:

The Nifty index is the underlying asset for futures and options transactions. You can buy a future contract for the Nifty index and proceed as you would with any other future contract for an asset. The same is true for options contracts, where you can buy a put or a call option on the index.

  1. Trading Nifty via Mutual Funds:

The same stock portfolio that makes up an index like the Nifty is featured in mutual funds.

As a result, these funds can effectively follow an index’s performance, enabling investors to benefit from the index’s ability to create wealth.

Note: In contrast to other mutual funds, index funds are reasonably priced, provide better diversity, and are more likely to give investors positive returns.

By investing in Nifty index funds, you would participate in each of the 50 parts that make up the Nifty 50 index, exposing you to a wide range of markets.

Conclusion:

The investor’s desired outcome, financial situation, and other factors all play a part in deciding which of the two to invest in. However, because the maximum time for investing in derivatives is only three months, investing in Nifty derivatives is preferred for the short term.

Nifty Invest funds are the superior choice over the long term because they carry less risk and need less monitoring time.

With all these facts on trading in NIFTY, looking for the perfect platform that offers online trading without any brokerage fees? Just visit the website, Shoonya by Finvasia, which allows trading on all the major stock exchanges with zero technology fees.

Happy investing:)