Everything You Need To Know About Nifty and Sensex
We all get to see and read about Nifty and Sensex gone down or up by certain points. But very few of us give a thought on why they appear in the news, how they are calculated, and what exactly they are?
Before understanding Nifty and Sensex, we should know the Indian stock exchange first. Stock exchange is basically a place where shares of companies listed on the stock exchange are bought and sold. The place where the transactions happen is called a stock market. In India, there are two most popular and biggest stock exchanges. They are BSE (Bombay Stock Exchange), and NSE (National Stock Exchange).
BSE (Bombay Stock Exchange)
BSE was established in 1875, and it is one’s of the oldest stock exchanges of Asia, and 10th largest stock exchange in the world located at Dalal Street, Mumbai. Its overall market capitalization as of April 2018 was $4.9 trillion. It has also achieved a mean feat of clocking a median trade speed of six micro seconds. As of now, 5,500 listed are listed on BSE. It was formally acknowledged by the Indian Government in August 1957 under the Securities Contracts Regulation Act.
NSE (National Stock Exchange)
NSE was established in 1992, with a head office in Mumbai, Maharashtra. It’s world’s 10th largest stock exchange. This was India’s first stock exchange where a modern, fully automated screen-based electronic trading system was introduced to make trading easier for investors. Its market capitalization stands at US$1.41 trillion. Currently, 1600 companies are listed on NSE.
Stock Market Index
Given the number of companies listed on the stock market, it is difficult to know the market performance for every single company at a time. So a smaller value is set based on the average performance of all the listed companies on the stock exchange to represent the entire market. This value is the benchmark of the stock market and is called “Index.” It is used to measure the value of each section of the stock market.
Prices of selected stocks are taken into account to calculate the index. This index acts like a barometer to measure the overall performance of the market. By looking at the index, investors can identify the financial condition of the market and decide which stocks to invest in
It is the stock market index and is also called BSE 30 since it selects the top 30 well-established and financially sound companies from different sectors such as Infosys, ITC, L&T, TCS, Tata Motors, Tata Steel, HDFC Bank, BHEL, and others based on their free float market capitalization. It acts as an indicator to gaze at the market movement. Investors can easily identify whether a majority of the top 30 companies is performing well, or their shares are in demand looking at the Sensex. If the Sensex goes up, it means major stocks are in demand and the financial condition of most of the companies out of those top 30 is good. And when it goes down, it means the price of major stocks has gone down. The base year of Sensex is 1978-79 and the base value is 100.
It is the stock market index for NSE, and is also called Nifty 50 since it is calculated on the average performance of the stocks of top 50 Indian companies from 24 different sectors. The India Index Services and Products (IISL) owns and manage it. When calculating Nifty, four important factors are taken into account: base year, base value, performance of 50 most traded stocks, and top 50 stocks from 24 sectors. The base year is 1995 and the base value is 1000.
So the major difference between Sensex and Nifty is that the former is the stock market index for BSE and the latter for NSE. That’s all. Hope this post is helpful to the readers If you are new to stocks and want to learn from scratch, check our course details at www.wealthnote.in. Enroll now and start your share market journey today.