Are you curious about India’s stock market but don’t know where to start? Look no further! In this blog post, we will explore the two most prominent indices in the Indian stock market: Nifty and Sensex.
Nifty, also known as the Nifty 50, is an index of the National Stock Exchange (NSE) comprising 50 large-cap companies. Sensex, also called the BSE Sensex, is an index of the Bombay Stock Exchange (BSE) representing the performance of 30 well-established companies.
Nifty vs. Sensex
| Nifty | Sensex |
|---|---|
| Nifty is an index of the National Stock Exchange of India (NSE), representing the top 50 companies listed on the exchange. | Sensex is an index of the Bombay Stock Exchange (BSE), comprising the 30 largest and most actively traded stocks on the exchange. |
| It includes 50 companies from various sectors, providing a broader representation of the Indian stock market. | It consists of 30 companies, which are typically leaders in their respective industries, giving a snapshot of the overall market performance. |
| Nifty is computed using a free float market capitalization weighted methodology, considering the total market value of the shares in the index. | Sensex is calculated using the market capitalization weighted methodology, taking into account the stock prices of its constituent companies. |
| It is considered a benchmark for the performance of the broader market and is widely used by investors and fund managers to assess market trends. | It is one of the oldest and most widely tracked indices in India, often used as a barometer for the overall health of the Indian stock market. |
| Nifty undergoes periodic rebalancing to maintain its representation of the top 50 companies, adding or removing companies based on predefined criteria. | Sensex also undergoes periodic rebalancing, where companies may be added or removed based on factors like market capitalization and sector representation. |
| It is primarily focused on companies listed on the National Stock Exchange (NSE), making it more representative of the overall performance of companies listed on that exchange. | It includes companies listed on the Bombay Stock Exchange (BSE), providing insights into the performance of the companies listed on that particular exchange. |
What is the Nifty Index?
The Nifty is a stock market index in India that is widely considered to be a benchmark for the country’s equity markets. The index is composed of 50 of the largest and most actively traded stocks on the National Stock Exchange (NSE). It is seen as a barometer for the overall performance of the Indian stock market.
The Nifty Index was launched on April 22, 1996, with a base value of 1,000. As of June 2019, the index has reached an all-time high of 11,760. The Nifty 50 is owned and managed by India Index Services and Products Ltd. (IISL), which is a subsidiary of the NSE.
What is the Sensex Index?
The S&P BSE Sensex (also known simply as the “Sensex”) is a stock market index that represents the weighted average of 30 large and well-known companies listed on the Bombay Stock Exchange (BSE). It is the most widely quoted and followed index in India and is also used as a benchmark for Indian equity markets.
The word “Sensex” is a portmanteau of the words “Sensitive” and “Index”, and was originally calculated by taking the sensitive index and dividing it by 100. The Sensitive Index was created by the BSE in 1986 and was designed to measure changes in the overall market. The index is now maintained by S&P Dow Jones Indices, which took over responsibility for it in April 2018.
The Sensex is often used as a barometer for the health of the Indian economy and is also seen as an indicator of investor confidence in India. A rising Sensex indicates that investors are confident about the future prospects of Indian companies, while a falling Sensex indicates that they are less confident.
Benefits of investing in india’s stock market
For one, the Indian economy is expected to continue to grow at a rapid pace. In fact, India is projected to be the world’s fastest-growing major economy in 2019 and 2020, according to the IMF. This economic growth will likely lead to more opportunities for companies listed on the Indian stock exchanges.
Another reason to consider investing in India’s stock market is the country’s large population. With over 1.3 billion people, India has a huge potential consumer base for companies that are able to tap into this market.
The Indian government has been taking steps to make it easier for foreign investors to participate in the country’s stock market. In recent years, the government has liberalized Foreign Direct Investment (FDI) rules and allowed foreign portfolio investors (FPIs) greater access to the market.
Tips for navigating the indian stock market
- Educate yourself on the basics of how the stock market works. There are many resources available online and in print.
- Get to know the major players in India’s stock market. The NSE and BSE are the two main exchanges, but there are also a number of regional exchanges.
- Choose an index or sector that you want to track. The Nifty Fifty and Sensex are broad benchmarks, but you may want to focus on a particular sector such as banking or energy.
- Find a reputable broker to work with. This is especially important if you’re not based in India. Your broker should be able to provide research and advice on investing in Indian stocks.
Key differences between Nifty and Sensex
- Constituent Companies: Nifty includes 50 companies from various sectors, providing a broader representation of the Indian stock market, while Sensex consists of 30 companies, typically leaders in their respective industries, giving a snapshot of overall market performance.
- Calculation Method: Nifty is computed using a free-float market capitalization-weighted methodology, considering the total market value of the shares in the index, whereas Sensex is calculated using the market capitalization-weighted methodology, taking into account the stock prices of its constituent companies.
- Market Impact: Nifty is considered a benchmark for the performance of the broader market and widely used by investors and fund managers to assess market trends, while Sensex is one of the oldest and most widely tracked indices in India, often used as a barometer for the overall health of the Indian stock market.
- Difference between Internal and External Sources of Finance
- Difference between Horizontal and Vertical Analysis
- Difference between Intraday and Delivery Trading
Conclusion
Nifty represents a broader market with 50 diverse companies, while Sensex focuses on 30 industry leaders. Nifty is widely used as a benchmark for market trends, while Sensex is considered a key indicator of overall market health. Understanding the distinctions between Nifty and Sensex can help investors choose the index that aligns with their investment objectives and provides relevant insights into the Indian stock market.
