In this thread I'll explain how Nifty50 is reconstituted i.e how companies are included and excluded from the index.

Let's go 👇🧵

- Nifty50 is reconstituted 2 times every financial year ( September and March)
- Data from 1st Feb to 31st July decides which companies are are to included/excluded in September.
-Data from 1st Aug to 31st Jan decides which companies are are to included/excluded in March.

Besides some trivial requirement there are two major requirements for a company to be included :-

1) Impact cost :- It is the cost of buying and selling a stock with a wide spread between bid and ask price. High impact cost simply means that the stock is illiquid.

A stock which wants to get included in Nifty50 should not have an average impact cost of more than 0.50% on a pre-determined quantity. The data to compute this is not put out for public perusal so it is better to leave the calculation to the exchange.

2) Free-Float Market Cap :- It is the market value of Non-promoter shares. Further it excludes locked-in shares, Shares in employee welfare trust category, Cross holdings, Shares held by promoters through ADRs/GDRs etc