- What is Sensex and Nifty?
- Which 30 companies make up the Sensex?
- How to calculate Sensex?
- How to calculate Nifty?
- Understanding Sensex and Nifty trends and movements.
- What is Sensex and Nifty – Some FAQs
1. What is Sensex and Nifty?
We all have heard of the terms Sensex and Nifty, but most of us won’t be knowing what is Sensex and Nifty. The Sensex and Nifty are ” Indices (indicators) of the stock market. The index is an indicator that gives a general idea about stocks going up or going down.
The Sensex is an indicator that comprises all the major companies listed on BSE (Bombay Stock Exchange), which is in Bombay. In contrast, Nifty is an indicator of all the major companies listed on NSE (National Stock Exchange), which is in Delhi.
Nifty is the stock market index for the National Stock Exchange (NSE). “NIFTY-National Stock Exchange Fifty ” is a broad index of NSE. It comprises 50 stocks, but right now, there are 51 stocks, commonly known as NIFTY 50 or CNX Nifty, which is owned and operated by IISL (India Index Services and Products Ltd).
Sensex is the benchmark index of S&P BSE (Bombay Stock Exchange), which consists of 30 stock (although 1000s of companies are listed in BSE, only 30 are considered for calculating the Sensex and is assumed that these 30 companies replicate the market.
2. Which 30 Companies make up the Sensex?
The 30 companies that make up Sensex are selected and reviewed from time to time by an “Index Committee.”
The “Index Committee” is usually made up of academicians, mutual fund managers, finance journalists, independent governing board members, and various other members in the financial market.
The companies are selected based on various factors like Trading frequency, market capitalization, listing history, sector to which the stock belongs, and many more.
Note The 30 Stocks changes after a certain period.
Now, as we have got a little idea on what is Sensex and Nifty, let’s now understand how to calculate them.
3. How to calculate Sensex
Let’s understand the formula to calculate Sensex:
Take the sum of the free-float market cap of the in-market 30 benchmark stocks * Index factor, where
index factor = 100/Market cap value
100 = index value.
Free float market capital = No of shares available for the public to trade*Market price of a share.
4. How to calculate Nifty?
NIFTY is also computed using the free-float market capitalization-weighted method, where the stocks in the index reflect the total market value of the stocks.
The mathematical formula to arrive at the value of NIFTY is:
Market Capitalization= Equity Capital x Price
Free Float Market Capitalization= Equity Capital x Price x IWF
Index Value= Current Market Value/ Base Market Capital x Base Index Value (1000)
Now after understanding what is Sensex and nifty and how to calculate them, let’s now understand more about their movements and trends.
5. Understanding Sensex and Nifty trends and movements
Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty goes up, it means that most stocks in India went up during that given period.
- If Nifty goes up, then it means that the stock price of significant stocks on NSE has gone up.
- If the nifty goes down, it means that the stock price of significant stocks on NSE has gone down.
The same is for Sensex. Moreover, when Sensex or Nifty goes high, it shows the economic growth of the country, if it keeps declining, it means that there is a slow – down or depression in the country’s economy.
6. What is Sensex and Nifty – Some FAQ’s
- What is NIFTY and SENSEX?
NIFTY is National Fifty, while Sensex is Sensitive Index.
- Who governs Sensex and Nifty?
NIFTY is related to National Stock Exchange (NSE) whereas Sensex is Related to Bombay Stock Exchange (BSE)
- What are the Sensex and Nifty Indicators?
Nifty is the indicator of top companies that are heavily traded on NSE, while Sensex is the indicator of top companies traded on BSE.
- When was Sensex and Nifty found?
Sensex is older than Nifty and was founded in 1986, whereas Nifty was found in 1995.
- How many companies are indexed with Sensex and Nifty?
Nifty is national 50; hence 50 companies are indexed in Nifty, and 30 companies are indexed in Sensex.