The Nifty 50 is calculated by using the free-float market capitalization method . Let's break it down in detail to understand the steps, the factors that affect the Nifty 50, and how companies are added or removed from the index. 1. Free-Float Market Capitalization Method: 1.1 Formula for Nifty 50 Index Calculation: The Nifty 50 index is calculated as follows: Nifty 50 Index = ( ∑ ( Stock Price × Free-Float Market Cap ) Base Market Capitalization ) × Index Divisor \text{Nifty 50 Index} = \left( \frac{\sum \left( \text{Stock Price} \times \text{Free-Float Market Cap} \right)}{\text{Base Market Capitalization}} \right) \times \text{Index Divisor} Where: Free-Float Market Cap : Market price of the stock multiplied by the free-float factor , which is the number of shares available for trading in the market (excluding promoter shares, government shares, and shares held by insiders). Base Market Capitalization : This is the total market capitalization ...