What is Nifty and Sensex? Basics of Stock Market Index!

stock market indices
image credit : google images

What are Nifty and Sensex?

To understand what is Nifty and Sensex one needs to understand the Indian stock exchanges first, but first, let’s discuss the two major stock exchanges in India that are the BSE and the NSE along with their indexes.

  • Bombay Stock Exchange (BSE)

It is an Indian stock exchange which is situated at Dalal Street, Mumbai, Maharashtra.

It was established in the year of 1875 and is Asia’s oldest stock exchange.

It is the world’s fastest stock exchange as it has a median trade speed of 6 microseconds.

As of Feb 2022, 5,246 companies trading on the BSE were worth over Rs 264 L Cr (Rs 26,451,334.95 Crore), as per data available on the exchange.

What is an Index? 

Since there are thousands of companies listed on a stock exchange, hence it’s really hard to track every single stock to be able to evaluate the market performance at a time, and therefore a smaller sample is taken which is representative of the whole market, whereas this small sample is called Index and it helps in the measurement of the value of a section of the stock market, and the index is computed from the prices of selected stocks.

SENSEX

It is also called BSE 30 which is the market index consisting of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE).

The 30 companies are selected based on free-float market capitalization.

These are different companies from various sectors representing a sample of large, liquid, and representative companies.

The base year of it is 1978-1979 & the base value is 100.

It is an indicator of market movement.

If the Sensex goes down, this tells one that the stock price of most of the major stocks on the BSE has gone down, and if the Sensex goes up it means that most of the major stocks on the BSE went up during the given period.

  • National Stock Exchange (NSE)

The National Stock Exchange (NSE) is the leading stock exchange in India, located in Mumbai, Maharashtra, India, and it was started to end the monopoly of the Bombay stock exchange in the Indian market.

NSE was established in 92 as the first demutualized electronic exchange in the country.

It was the first exchange in India to provide a modern, fully automated screen-based electronic trading system that offered an easier trading facility to investors spread across the length and breadth of the country.

It has a total market capitalization of more than US$ 3.06 Tr, making it the world’s 9th-largest stock exchange as of April 2018.

Its index, the NIFTY 50, is used extensively by investors in India and around the world as a barometer of the Indian capital markets.

It remained the world’s largest derivatives exchange for the second consecutive year in 2020 in terms of the number of contracts traded.

NIFTY or Nifty 50

It is also called NIFTY 50 and is the market index consisting of 50 well-established and financially sound companies listed on the National Stock Exchange of India (NSE).

The base year is taken as 95 and the base value is set to 1000.

It is calculated using 50 large stocks that are actively traded on the NSE.

The 50 companies are selected based on free-float market capitalization.

Its owner and manager is India Index Services and Products (IISL)

Nifty and Sensex Movements Meaning

Sensex and Nifty are both indicators of market movement, and if the Sensex or Nifty goes up, it means that most of the stocks in India went up during the given period, and concerning NIFTY and NSE, one can say that:

If it goes up, this means that the stock price of most of the major stocks on the NSE has gone up.

On the other hand, if it goes down, this tells one that the stock price of most of the major stocks on NSE has gone down.

The same is true in the case of Sensex, and when Sensex/Nifty goes high, it shows the economic growth of the country, or else if it keeps decreasing, it might mean a slowdown or depression.

Recent Posts

Scan to Download
ios&Android APP

Open trading account and start trading!

Join our happy customers