Does price of individual stocks depend on NIFTY? (Or other way round)

kingsmasher1

Well-Known Member
#1
Hi,

I had a perception that NIFTY is an index, and it's price is derived from the underlying top 50 companies (NIFTY 50).

Which means i can safely assume, that if price of 5 NIFTY 50 company stocks goes up, it in turn will bring up NIFTY index, not the other way round.

But today, on 14th March , i was surprised to see that the underlying NIFTY 50 stocks behaved somewhat exactly the same way as NIFTY (please see the graph in "Today" column).

How is that possible? Kindly help me to understand.

 

mohan.sic

Well-Known Member
#2
Hi,

I had a perception that NIFTY is an index, and it's price is derived from the underlying top 50 companies (NIFTY 50).

Which means i can safely assume, that if price of 5 NIFTY 50 company stocks goes up, it in turn will bring up NIFTY index, not the other way round.

But today, on 14th March , i was surprised to see that the underlying NIFTY 50 stocks behaved somewhat exactly the same way as NIFTY (please see the graph in "Today" column).

How is that possible? Kindly help me to understand.

your perception :) is correct. Nifty move is a reflection of combined effect of stock moves ( based on weight of each stock in nifty in percentage terms)
 

pannet1

Well-Known Member
#3
mohan,

i have another doubt .. how is nifty and bank nifty co-related ... if nifty is moving up .. can't bank nifty go down ... because our economy could never be co-related (at least positively) with banks.

bank is just a sector .. of the wider market .. so it should definitely possible .. that bank are bearish and the market is bullish.

what do you say.
 

mohan.sic

Well-Known Member
#4
mohan,

i have another doubt .. how is nifty and bank nifty co-related ... if nifty is moving up .. can't bank nifty go down ... because our economy could never be co-related (at least positively) with banks.

bank is just a sector .. of the wider market .. so it should definitely possible .. that bank are bearish and the market is bullish.

what do you say.
I don't have exact numbers..u may google and find out.

Nifty and bank nifty will have correlation bcz banking stocks will have appx 30% weightage in nifty.

So when banking is positive and other heavy weights ( like Reliance, Itc, Infy, Tcs ) are also positive, you can see perfect correlation.

When banking is positive and other heavy weights are flat, correlation looks like a Price line ( bank nifty ) and its moving avg line ( nifty )

when banking is positive and other heavy weights are negative, you may see divergence.

Its just about what weights stocks have in that index and how they are doing on that day.

So this correlation/ non correlation should be least concerned in a way.


And about correlation between economy and banks ... I don't know why you think they are not positively correlated..Am not strong on the topic,but my opinion is Economy and banking is positively correlated in India ( when you say banking, do not forget major private banks which are all profit making units )
 

kingsmasher1

Well-Known Member
#5
your perception :) is correct. Nifty move is a reflection of combined effect of stock moves ( based on weight of each stock in nifty in percentage terms)
Thanks for the answer.
But if you look at the intraday graph of all the companies whose screenshot i posted, all of them behaves alike. How come it is possible for so many companies stock to behave exactly the same way as NIFTY?

That's where my earlier perception i started doubting on - whether it is NIFTY following the others or others following NIFTY.

Please help me to understand.
Thanks again.
 

mohan.sic

Well-Known Member
#6
Thanks for the answer.
But if you look at the intraday graph of all the companies whose screenshot i posted, all of them behaves alike. How come it is possible for so many companies stock to behave exactly the same way as NIFTY?

That's where my earlier perception i started doubting on - whether it is NIFTY following the others or others following NIFTY.

Please help me to understand.
Thanks again.

You already knew that Nifty is a Index of 50 stocks but still posted that illogical question .....

And you are repeating it again after a answer...

how to respond i dont know..
 

kingsmasher1

Well-Known Member
#7
You already knew that Nifty is a Index of 50 stocks but still posted that illogical question .....

And you are repeating it again after a answer...

how to respond i dont know..
If i am asking again after you answered, that indicates your answer lacked preciseness or accuracy to clear my doubts :). So you can either help explaining me, if you have a better way to do so, if not, then the question remains open for someone else, who can clear it - with a more accurate explanation.

But i think you did not get my point - if an index is dependent on suppose "n" things, then "n" things should not behave exactly like the index, but the other way round, which is the reason i posted this with a screen shot.

Additionally, i think it is highly impolite on your part to comment someone's question as illogical - without understanding what the other person is trying to say.
 
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mohan.sic

Well-Known Member
#8
If i am asking again after you answered, that indicates your answer lacked preciseness or accuracy to clear my doubts :). So you can either help explaining me, if you have a better way to do so, if not, then the question remains open for someone else, who can clear it - with a more accurate explanation.

But i think you did not get my point - if an index is dependent on suppose "n" things, then "n" things should not behave exactly like the index, but the other way round, which is the reason i posted this with a screen shot.

Additionally, i think it is highly impolite on your part to comment someone's question as illogical - without understanding what the other person is trying to say.

It would be impolite if i say your question is Stupid. I said its Illogical. Nothing wrong.
Because, if you want to learn you must start thinking logically.


Now on that day 14th march - most of the stocks might be in uptrend. So obviously you will see a correlation between Nifty chart and stocks charts. Whats wrong with that.

And you posted a image from nse page reflecting capsule size charts. Do u think they give a picture of actual intraday movements ? Absolutely no.

Reason for your imagination: In that image of 14th march, Nifty and all other stocks charts have a huge upside right on the start of the day. Due to this all the images are looking somewhat similar. That is not correct. Nifty opened gap up on the day ( other way - many stocks opened gap up ). That surge on the charts is not actual move. Thats gap Up.
 
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