The Complete Beginner’s Guide to Fin Nifty: Everything You Need to Know
If you are a budding investor and want to try your hands at the Indian stock market, this guide is for you. Generally, it’s not the process that is tricky, but the concept. Sometimes, not knowing the basic terms is the root cause of mishaps. Hence, this guide speaks about the very basic, ‘what is fin nifty’. Read on to find out more about one of the most popular stock market measures in India.
What is Fin Nifty?
Fin Nifty, aka NIFTY financial services index, is a share market index, where Nifty stands for “National Stock Exchange of India”. It is a group of 20 stocks from different Indian banks and service companies that are listed on the NSE (National Stock Exchange).
Just like the Nifty 50, these stocks are picked based on their free-float market capitalization. In simpler terms, the Fin Nifty index’s job is to keep a solid track of how the Indian financial sector is functioning. Consequently, this helps investors find an accurate way to measure the performance and growth of the sector.
Composition of the Fin Nifty
As discussed above, Fin Nifty is made up of 20 stocks from insurance companies, home finance companies, banks, non-banking financial companies (NBFCs), and other financial service companies or institutions.
Listed below is a list of 20 Fin Nifty companies that are part of the index:
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HDFC Bank Ltd.
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HDFC Life Insurance Company Ltd
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ICICI Bank Ltd.
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ICICI Prudential Life Insurance Company Ltd.
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ICICI Lombard General Insurance Company Ltd.
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Kotak Mahindra Bank Ltd.
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Aditya Birla Capital Ltd.
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State Bank of India
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SBI Life Insurance Company Ltd.
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Axis Bank Ltd.
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Bajaj Finance Ltd.
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Bajaj Finserv Ltd.
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Housing Development Finance Corporation Ltd.
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Cholamandalam Investment and Finance Company Ltd.
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General Insurance Corporation of India
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Shriram Transport Finance Company Ltd.
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SBI Cards and Payment Services Ltd.
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Mahindra & Mahindra Financial Services Ltd.
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SBI Funds Management Pvt. Ltd.
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Indiabulls Housing Finance Ltd.
Why Should You Put Money Into Fin Nifty?
The first reason is reduced risk. By adding top financial industry leaders, Fin Nifty reduces the non-systematic risk of investment. This also indicates lowering the risks that come with things like strikes, falling sales, smaller profit margins, higher financing costs, and natural disasters.
Fin Nifty also allows investors to spread their risk across different businesses. As a result, this smart approach reduces both financial and operational risks. Last but not least, Fin Nifty gives investors an interesting opportunity to be a part of a well-diversified portfolio by focusing on the top-performing financial firms with the biggest market capitalization.
How To Invest in Fin Nifty?
Generally, it is easy to trade in the Indian financial sector through Fin Nifty because it has a lot of different financial entities. However, as an investor, you cannot put all your money straight into the index directly.
Instead, you can put your money into index funds that have the same weightage as Fin Nifty’s contributors. You can also pick ETFs (Exchange Traded Funds) that are tied to the Fin Nifty index and are managed by banks.
Additionally, F&O (Futures and options) contracts help investors to take a guess on how the prices of financial stocks might change in the future. You can check the option trading in nifty. Option chains are lists of all the options that are out there, along with information about them. This includes live prices, open interest, puts and calls, strike prices, volume, etc.
Note: Keep in mind that the information on the option chain is not fixed and keeps changing during the trade session.
This is what the option chain looks like:
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Open a Demat account. This is the first thing you need to do to start buying Fin nifty stocks.
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For mutual funds, look for plans that work like the Fin nifty code.
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With futures and options contracts, you can guess how prices will move in the future.
Conclusion
Summing up, the Fin Nifty Index has been doing excellent because it has exposure to different sectors in the financial market. As an investor, the most important thing to keep in mind is to diversify your holdings and do your homework. Investing is all about patience and understanding the basics.