When it comes to generating wealth, stock market investment ranks first. If you’re ready to stay committed for the long term, your investments can pay off significantly. One of the best ideas to invest in the share market is to invest in the nifty index. However, Do you know how to Buy Nifty Index? If your answer is no then let’s discuss it in detail.
Table of Contents
Introduction
The Nifty 50 is a broad-market index in India that represents the price volatility of 50 of the country’s major companies traded on the National Stock Exchange. People use it significantly to analyze the performance of the overall equity market. The concept behind nifty is that it represents firms from 14 different industries.
It is one of the main reasons why it is recognized as a reliable indicator of share market strength. As a consequence, an individual who trades in the Nifty 50 index can effectively expose himself to a broad range of different firms in a single transaction. It reduces his investment risk significantly.
How to Buy Nifty Index?
Since it is an index, it cannot be purchased like a specific share. Nevertheless, there are a handful of potential ways to make money from the index’s volatility. You can invest in the Nifty index in one of 2 manners: through derivatives or through mutual funds. Let’s take a closer look at both of these approaches.
Derivatives
Nifty derivative contracts including futures and options specified index as a basic asset. This simply means that the derivatives’ price movements are connected to the index’s. Dealing in these derivatives allows you to benefit from the index’s price changes.
However, there is one thing to keep in mind, you will not be able to take delivery of it as the index is not a stock, its derivative contracts expire on every monthly expiry. However, at the conclusion of the expiry, all index derivatives will be required to be cash-settled.
Now that you have a fundamental understanding of how to invest in Nifty through derivatives, let’s look deeper and explore more about How to Buy Nifty Index via Futures and options.
How to Buy Nifty Index via Futures
If you have a bullish or bearish perspective on the Nifty index, you can gain from market swings by investing index futures contracts.
Example 1
Suppose that on June 15, 2021, the Nifty is currently trading at 15,800 points. You have an optimistic outlook and believe the index will rise to roughly 16,000 by the expiry date.Now, how do you trade Nifty futures? Here are a few trading tips for the Nifty.
All you have to do is buy the Nifty June Future contract at a price of 15,800 rupees. And if the index performs as expected and reaches 16,000 before the contract expires, you can easily square off your trade and earn profit.
Example 2
Suppose you have a negative outlook and predict the index to fall to roughly 15,000 by the expiry date. What are your options in this situation? Is it still possible to use index futures? Yes, you certainly can. Here’s a simple Nifty trading technique to get you started.
In this situation, all you have to do is short-sell the Nifty June Future contract at 15,000. If the index performs as expected and drops below 15,000 before the contract expires, you can easily square off your trade and earn profit.
How to Buy Nifty Index via Options
You may profit from market swings with Nifty options contracts, just like you did with futures. Now, how do you use options to invest in the Nifty? Are there any useful option suggestions you could use? There is, indeed. Let’s take the same example as earlier.
Example 1
Assume that on June 1, 2021, the Nifty is trading at 15,800 points. You believe the index will rise to roughly 16,000 by expiry date because you have an optimistic outlook.
You buy a call option contract on the index with your desired strike price. You can buy the Nifty June 16000 CE option contract because you think the index will rise to roughly 16,000 points.
Furthermore, you might buy an index call option contract with a strike price less than the index’s current currency trading price. However, you will have to pay a significant premium for it, which will increase your initial investment costs.
If the index rises in line with your predictions after you purchase a call option contract, all you have to do is square-off your trade to profit substantially.
Example 2
Assume you have a negative outlook and believe the index will fall to about 15,000 by expiry. All you have to do in this case is buy a put option contract on the index with a strike price of your preference. You can buy the Nifty June 15,000 PE option contract because you predict it to decline to approximately 15,000 points.
When the index drops, you can easily square-off your holdings and get the benefits of your investment. These are only a few of the Nifty trading ideas that you might utilize when trading in Nifty derivative contracts. In reality, there are a number of unique Nifty trading approaches you can deploy to earn profit from the index’s volatility.
How to Buy Nifty Index Fund?
A Nifty index fund is basically a mutual fund that invests in the shares of firms that are included in the Nifty index. Investing in a Nifty index fund is similar to participating in a mutual fund rather than a share.
The Nifty index fund is based on the fact that the fund’s elements are equal to the firms that make up the Nifty 50 index. Since the fund replicates the performance of the Nifty 50 index, it does so regardless of market conditions.
How Index fund works
Typical mutual funds have a fund manager that selects shares relying on a set of criteria. These mutual funds, on the other hand, hardly offer wide market exposure or risk mitigation.
As a consequence, even when the financial markets are performing well, the fund’s Net Asset Value (NAV) could fall due to the poor performance of several selective firms in the portfolio.
When you buy in a Nifty index fund, this situation is uncommon to occur because the poor performance of a handful of firms is eventually offset by the out-performance of other shares.
A Nifty index fund dramatically decreases the kind of risk you’re exposed to and provides a level of protection by providing consistent long-term returns.
Benefits of investing in a Nifty index fund
Below are some of the benefits of a Nifty index fund over specific shares and other typical mutual funds.
Risk
So because equities in the Nifty index fund are equal to those in the Nifty 50 index, you can benefit from broader market access, substantially diversifying your portfolio and lowering risk.
Even if you are exposed to practically all of the key industries and sectors in the market, although if one sector under performs, your results are not significantly impacted.
Returns
The profits you receive may be larger in comparison to particular shares or industries, but they may not be consistent due to market movements.
When you participate in a Nifty index fund, nevertheless, this is not the case. The returns you get here are more consistent, and the prospects for great growth with these investments is limitless.
Viewpoint is being eliminated
It’s difficult to put your feelings aside when picking companies for investing, if you’re a fund manager or an independent trader.
Due to this a Nifty index fund is designed to match the Nifty index, there is no sentimental influence and the choice of the company allocation is totally unbiased.
How to Buy Nifty Index fund directly
The process mentioned below will provide you a general notion of how to buy directly in a Nifty index fund.
Step 1
To invest in a Nifty index fund, you must first have a trading and demat account. If you don’t already have one, you can open one by going to your preferred stockbroker’s official site.
Step 2
Follow your stockbroker’s instructions for opening a trading and demat account. This would necessitate the completion of an online application form. You may also be required to upload a signed copy of Know Your Customer (KYC) papers such as proof of identification, proof of address, and proof of income.
Step 3
Your brokerage will handle your application for a trading and demat account once your KYC verification is complete.
Step 4
Once you’ve completed the application procedure, you’ll be given a unique user ID and password. You can use this to access the trading portal of your brokerage.
Step 5
Go to the mutual fund area of the trading platform after logging in and select a Nifty index fund.
It’s a smart option to undertake a thorough research of a Nifty index fund’s effectiveness and track record before investing in it.
Also, make sure you read all of the scheme-related documentation.
Step 6
Once you’ve decided on a Nifty index fund, you can either initiate a Systematic Investment Plan (SIP) or make a one-time lump-sum transaction of the fund’s units.
Nifty Derivatives or Index Funds, which one is better?
Trading in Nifty derivatives is among the finest Nifty trading ideas you can follow, but it is more focused on the short term.
This is due to the fact that you can only invest in a derivative contract for a maximum of three months before it expires. Furthermore, derivatives are more volatile and demand constant monitoring of performance.
Buying in a Nifty index fund is the ideal way to go if you’re searching for a long-term Nifty financial strategy with minimal risk and little to no need for daily tracking.
Conclusion
The choice of Selecting Derivatives or index funds totally depends on your personal view. If you need higher returns with huge risk than go for Nifty Derivatives and if you need normal returns with lower risk than Index fund is best.
This is all from our side regarding How to Buy Nifty Index? Let us know your views in the comment section.
Other Interesting blogs related to How to Buy Nifty Index:
How to Earn Money in Share Market Daily
SIP Investment is Good or Bad?
Difference between Nifty and Sensex
FAQ
How to buy Nifty 50 index fund?
Login in to your demat & trading account and go to the mutual fund section . You can find many nifty 50 index funds from which you can select according to your choice.
How to buy Nifty index Zerodha?
Log in to your Zerodha account and click in the coin section where you can find many nifty index funds. You can select one according to your choice.
How to buy Nifty 50 in HDFC securities?
Login in to your demat & trading account in HDFC Securities and go to the mutual fund section. You can find many nifty 50 index funds from which you can select according to your choice.
How to buy Nifty 50 in ICICIdirect?
Login in to your demat & trading account in Icici Direct and go to the mutual fund section. You can find many nifty 50 index funds from which you can select according to your choice.
How to buy Nifty 50 in Upstox?
Login in to your demat & trading account in Upstox and go to the mutual fund section. You can find many nifty 50 index funds from which you can select according to your choice.
