Sensex vs Nifty
We all hear about the Sensex and Nifty on TV, in the newspaper, and everywhere else. There is a lot of discussion about their ups and downs on TV channels and in newspapers every day. On the other hand, have you ever heard of the Sensex and the Nifty? And what is the difference between them? If not, then today we are going to tell you about it. The Sensex and Nifty are BSE and NSE indexes. Let us learn more about Index-
What is the Stock Market Index?
The index is an indicator of the overall performance of the stock market. Index, which comprises a basket of stocks that track the performance of these securities, further helps in gauging the overall sentiment of the stock market.
The index includes various industries such as IT, pharmaceuticals, and banks. Thus, it shows the overall picture of the stock market.
Importance of Stock Market Index
- The performance of the country’s stock market and economy is a leading indicator.
- Indexes act as benchmarks in the financial markets for a variety of objectives.
- Provide help in the historical comparison of returns on funds invested in stocks as compared to other investments, such as gold or debt.
- Market indices are frequently used by investors to manage their investment portfolios and track the financial markets.
- Indices help gauge the mood of investors. You may even recognise investor sentiment for a particular sector and across market capitalizations.
What is Sensex and Nifty
The Bombay Stock Exchange (BSE) and the National Stock Exchange are the two primary stock exchanges in India (NSE). Sensex is a BSE-owned index, whereas NIFTY 50 is an NSE-owned index.
| Stock Exchange | Index | No. of Company |
|---|---|---|
| National Stock Exchange (NSE) | Nifty | 50 |
| Bombay Stock Exchange (BSE) | Sensex | 30 |
Sensex
Sensex is an index of the BSE, i.e., Bombay Stock Exchange. The 30 largest companies in the country are indexed on the basis of market cap in the Sensex index. This includes big companies like Reliance, MRF Tyre, Maruti Suzuki, TCS, and Infosys. The Sensex has fluctuated in a couple of seconds.
The Sensex was launched on January 1, 1986. It includes a total of 30 companies. This is why it is often referred to as BSE-30. The fluctuations of the Sensex show the position of the country’s big companies and the stock market.
Nifty
Nifty comes under National Stock Exchange. It is the index of NSE.50 companies in the nation that are included in the Nifty index. These businesses are chosen from 12 distinct national industry categories. “National” and “50” are combined to form the word “nifty.” Nifty is also known as Nifty 50.
It first began in 1994. The Nifty’s volatility provides insight into the market’s direction and trend.
The top 50 stocks that make up the Nifty 50 are spread across 12 distinct industries. Information technology, consumer products, financial services, autos, telephones, and so forth are a few of these.
The following requirements must be completed by the companies in order for them to be included in the Nifty 50:
Liquidity: The stock should have been traded at an average cost of 0.50% or less in the last six months.
Float Adjustment: At least twice as much as the current smallest index constituent must be invested in the company’s float-adjusted market capitalization.
Domicile: The company must be an Indian company and be listed on the National Stock Exchange (NSE).
Let us know what is the special difference between the Sensex and the Nifty?
| Particulars | Sensex | Nifty |
|---|---|---|
| Incorporated | 1986 | 1996 |
| Made up | “Sensitivity and Index” | “National and Fifty” |
| Benchmark | Benchmark index of BSE | Benchmark index of NSE |
| No. of stocks | 30 stocks | 50 stocks |
| Base value | Sensex index base value is 100 | Nifty index base value is 1000 |
| Base year | 1997-98 | 1995 |
| Sectors | Covers 13 sectoral indices | Covers 24 sectoral indices |
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Major factors that affect the performance of indices
The state of the nation’s economy is frequently reflected in the stock market. There is frequently some market sluggishness during an economic recession.
The following are some of the variables that influence how well the indices perform:
Interest Rate
The stock market index goes up and down when interest rates fluctuate. For instance, the cost of borrowing for firms increases when the government boosts interest rates. The corporation strives to reduce its expenses as a result. As a result, both the share price and the company’s profitability may suffer as a result.
Inflation Rate
Additionally, inflation affects stock market indices. For instance, people do not have a surplus to invest in when inflation is high. As a result, the investment power is diminished. Companies are also affected by it. Customers pay more as a result of the company’s higher input expenses. These have an effect on the company’s earnings and have a direct impact on sales. Consequently, the share prices are also impacted.
Global Economy
A worldwide economic downturn has an impact on the equities markets. Additionally, factors like crude oil prices, political unpredictability, currency exchange rates (movements in the rupee), etc. all have an impact on stock market performance.
Which is better, NSE or BSE?
India has two stock exchanges: NSE and BSE. India’s first stock exchange was the Bombay Stock Exchange (BSE). The largest stock exchange in India, by contrast, is the National Stock Exchange (NSE). When compared to the BSE, the NSE has higher trade volumes. In other words, buyers and sellers are more active on the NSE. Additionally, NSE has more liquidity. It simplifies trading and gives investors more chances to turn equities into cash.
The BSE, on the other hand, is a vast stock exchange. The BSE includes a large number of companies. Additionally, all equities that are a part of the NSE are also a part of the BSE. Furthermore, NSE or Nifty have a monopoly in the derivatives sector. The most actively traded indices are NSE Nifty and Bank Nifty.
As a result, NSE is preferred by traders and experienced investors, whereas BSE is better suited for newcomers. Additionally, BSE is the best option for an investor wishing to invest in new businesses. However, the NSE’s derivatives market is the best option for traders who deal in futures and options.
