What Is Nifty 50？ How To Buy Nifty 50 and How To Invest In Nifty 50 2022？

Sitting at the very top of the strategies for wealth creation is investing in the stock market. A wise investment like this has the potential to yield handsome rewards. But the truth is that they are not without their inherent risks.

For instance, if the financial market experiences a downturn, you could lose a substantial part of your investment or capital. One of the best strategies you can apply to lessen your exposure to market risk is to invest in the Nifty 50. I know you’re wondering what is Nifty 50? How do I invest in the Nifty 50?

This article will answer the questions of what is Nifty 50 and how to invest in Nifty 50. To further expand your capacity to build considerable wealth, we will also delve into how to buy Nifty 50, how to invest in the Nifty 50 via CFD trading, and CFD trading’s advantages.

The Nifty 50 refers to shares of the 50 top companies on the floor of the National Stock Exchange of India (NSE). They are listed according to their market capitalisation size. These 50 blue-chip companies are the most trustworthy, reliable, liquid, and well-organized of the approximately 1600 companies listed and traded on the NSE. Most of these companies possess robust growth numbers and strong balance sheets. Although these companies have an expansive international footprint, they are domiciled in India.

These Nifty 50 companies have a reputation for financial soundness and cover the 14 key sectors of the economy, such as energy, technology, utilities, finance, etc. This is one of the reasons traders use it to measure the stock market’s performance as a whole. When you hear investors say the market is down or up, they usually refer to the Nifty 50 index or the average performance of their stocks.

This index or list is not constant but rather dynamic. There is a 6-month review period for companies to show that they deserve their place on the index. Old companies whose performances show consistent deterioration are removed to make way for new ones. New companies that satisfy the criteria of specific levels of liquidity float market capitalisation, trading frequency, and listing history are added.

How big is Nifty 50? Let’s paint you a picture. The Nifty 50 stocks alone represent 65% of the entire market capitalisation of all the companies on the stock exchange. Some companies currently on the Nifty 50 are State Bank of India Ltd., JSW Steel Ltd., Reliance Industries, Bharat Petroleum Corporation Ltd., Asian Paints, Infosys, and Bharti Airtel Ltd.

Studies have revealed that companies removed from the index usually experience a downturn in their stocks, while new companies that make the list enjoy a jump in their share prices. When you consider all these, it’s plain to see why you should start considering investing in the Nifty 50 stocks. But how can you buy the Nifty 50?

NIFTY Next 50 is the index that accounts index for the performance of the next 50 stocks in terms of free-float market capitalisation behind the top 50, depending on certain index criteria.

As a result, NIFTY Next 50 represents businesses that are now below the NIFTY 50 index components but may one day meet the requirements to join NIFTY 50 depending on the index criteria.

If you decide to invest in the Nifty 50 stocks, two fundamental investment options are open to you to buy the Nifty 50: direct stock route and indirect stock route. Let’s dig in.

The direct route will involve direct investment in the stocks. You will have to buy the shares of all the companies that make up the Nifty 50 index. Apart from the fact that this will require you to cough out a huge amount of money, the process is also hectic, time-consuming, and complicated. Since you can only buy complete stocks and fractions, you will have to part with a considerably high amount to replicate the shares of all the companies on the Nifty 50 index. There are some companies whose stock costs as much as Rs. 17,500. Imagine having to buy 50 such stocks.

The second route, the indirect stock route, is quite better and less complicated. The Nifty 50 index is simply a measurement of the price movement of the shares of the component companies on the list. Trading the Nifty 50 index will allow you access to the whole stocks of the Nifty 50 with only a single trading position.

Apart from exposing you to more trading opportunities, the Nifty 50 index is also very liquid and affords you more trading hours. Unlike the direct stock buying route, where you buy an underlying asset, the Nifty 50 index has no inherent value. This means you cannot take delivery of the stock because it’s just an index. You, as a trader, are taking part in the financial market without having to own the underlying assets. If you want to begin your investment journey, the Nifty 50 index is a good place to start.

Now that the two basic routes to buying the Nifty 50 stock have been explained and the indirect index route shown as the best, it’s time to dig a little deeper to understand how you can invest in the Nifty 50 index.

It is important to remember that a Contract for Difference (CFD) is a significant and legally binding agreement between two parties while investing in the Nifty 50. They are often referred to as "seller" and "buyer", and they specify that the buyer will pay the seller the difference between an asset's current worth and its value at the time of the contract.

Investment in the Nifty 50 index also has two primary ways: derivatives and mutual funds. Let’s take a closer look:

⭐ Index Mutual Funds and Exchange Traded Funds (ETFs): These funds feature the same stock portfolio in the Nifty 50. With these funds, you can participate actively in the index's value creation process. When you invest in Nifty using the route of index mutual funds or exchange traded funds (ETF), you get to be at the receiving end of many benefits. You enjoy lower risk, lower cost, better diversification, and better potential returns.

⭐ Derivative Contracts: You can invest in Nifty 50 stocks via derivative contracts like futures and options contracts. Here, the index functions as an underlying asset for these contracts. This means that the price movements and fluctuations are linked to the Nifty 50 index. So you can trade a stock at a specific price and/or on a specific date. These Nifty derivatives are one of the most profitable ways to trade.

Although futures and options are two of the most common derivatives, they are not the only ones. CFDs are another type of derivative. CFD stands for "Contract For Difference" and, as a form of derivative trading, allows speculators to trade financial instruments like the Nifty 50 index without owning the underlying assets.

CFDs are straightforward agreements to exchange differences in the price of an asset at the start and end of a contract. Although the investor will not take ownership of the underlying asset, the CFD is still very similar to the underlying market. CFD trading is designed in such a way that it closely mimics the underlying market. So when you buy an Infosys CFD, for instance, you own an Infosys share. This is one of the many benefits of trading the Nifty 50 index via CFD.

CFDs are a popular means of trading indices. You can trade stock indices via CFDs. With CFDs, the Nifty 50 index can be bought and sold just like the traditional way of trading stocks. What’s better is that this market gives traders the benefits of speculating on the movement of prices in both downward and upward directions. Unlike the traditional way, you can make money both ways, whether the price is falling or rising. If your analysis shows a fall in the index, open a short position. If your analysis reveals a rise in the index, open a long position. Either way, you make money. But what are the other advantages of CFD trading?

When compared to traditional markets, less time is spent on executing CFD trades because of their instant trading setup. CFD trading offers the chance to increase purchasing power during trading hours through leverage. With a fraction of your total CFD trade, you can open positions. This allows you to use your remaining capital in other trades. Although this increase in leverage can increase gains, it also raises your exposure to potential losses as a trader.

CFDs have transparent pricing systems because they are driven only by the movement of the underlying market and not by other factors. As stated earlier, with CFD, you are positioned to earn from both a fall and a rise in share prices. This flexibility makes market fluctuations your friend instead of your enemy.

Now you know what answers to give when you come across questions like what is nifty 50. How to buy nifty 50? How to invest in nifty 50? What are CFD trading’s advantages? How to trade indices with CFD? Also, you should be aware that apart from indices, CFD gives you access to other financial instruments like commodities, forex, and others. And our brokerage firm offers you all of these opportunities to earn and increase the value of your portfolio.

Trade the Nifty 50 index using the CFD. Start trading CFD indices with us today.