The Dynamic Duo ... the Terrific Trio ... the Fabulous Four ... the Famous Five ... and the NYSE Nifty Fifty?
Spot the odd one out, of course it’s the Nifty Fifty and not because the two words don’t start with the same letter!
The Nifty Fifty is not that era just past middle age, it’s not a part of the shipping report and it’s not related to an army of super heroes.
Representing the New York Stock Exchange leading 50 traded public companies, the Nifty Fifty got their notoriety in the bull markets of the 1960’s and early 1970’s and were seen as a one off stock purchase on the basis of their safety as an investment, leading people to believe that you could hold onto the stock fairly indefinitely. Yes, they are considered 50 of the most stable stock quoted businesses for the New York Stock Exchange (but not confined to operating within that region).
The UK equivalent to the New York Stock Exchange’s (NYSE) Nifty Fifty is the FTSE 100 and based in London whilst across the world stock markets you will find similar indices for each of the different stock markets. Companies included in the NYSE Nifty Fifty are General Electric, Coca cola and IBM.
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The
Nifty Fifty is one of many indices and its purpose is to provide in effect; a one glance illustrative benchmark of the economy as a whole, based upon the most stable of the world’s major businesses across a number of markets. The index is designed to be useful to both the professional trader and the layman alike; If the
Nifty Fifty appears to be doing well it would suggest a strong or growing US economy with investor confidence at high levels, and similarly if the Nifty Fifty fails to perform it would suggest uncertainties within the US economy and those businesses associated with the index.
24 sectors of the US economy are represented by the
Nifty Fifty and it is considered the flagship of the National Stock Exchange.
Theoretically, it could be possible for any business to qualify for selection within the
Nifty Fifty although it is a rarity for the NYSE to sanction such a change and any business that may be considered for inclusion meet certain criteria which include;
12% of its stock must be available for purchase by investors in the form of floating stock i.e. not a part of the owner or promoter’s portfolio.
The business must also pass the liquidity test proving a cost of transaction of less than 0.75% for over 90% of all trades in a six month period.
If you’re considering an investment within the
New York Stock Exchange and want to get a handle on current risk levels within the US
stock market, take a look at the Nifty Fifty as the performance of the 50 associated businesses is considered a good benchmark for the performance of the US economy as a whole.
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