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Nifty and Sensex- Key Points of Share Market

Diffrence between Nifty and sensex


Difference between Nifty and Sensex-share market index

Reading Time:-4:30min

We keep hearing about Sensex and Nifty in newspapers and TV.

 When I was a kid way back I remember the newspaper talking about Sensex and Nifty on news channels Almost Every day what exactly Sensex and Nifty for understanding that we first understand the concept what is an index?

Know about the index, it will pretty much easy to understand the difference between Nifty and Sensex share market index.


Sometimes it’s good to go back to basics and re-evaluate your investing strategies.

What is the share market Index?

Let you went to the supermarket for buying fruits and vegetables to know whether the fruit there is fresh or not are you goanna check each and every fruit there NO Right.

What you would normally do is to check maybe a couple of apple, banana, strawberry right in that you will decide fruits are fresh or not.

In the same way, if you want to know how the stock market is doing you can’t possibly go and check each and every share are stock and listed on exchanges because there are thousands of them.

Instead what you would rather do is to pick a sample of stock that is representative of the respective sector and see how they are performing.

So this sample of a stock is called index and companies that make up the index constituents.

An index is comprised of selected of all the major sector such as IT sector, pharmacy, Automobiles, Banking  etc.so when we are looking at the index is actually that representation the overall market.

The Concept of an index is used in every country you might know some of the famous stock market indexes

United states--> Dawjones and NASDAQ

London Stock Exchange Index-->FTSE

French stock Index--> CAC

Japan stock Index--> Nikkel

Hong Kong stock index--> Hang Seng.

India stock Index--> Sensex and Nifty.

In India, there are two stock exchange BSE (Bombay stock exchange) and NSE (National stock exchange). Sensex is the index of the stock listed on BSE and nifty is the index of the stock listed on NSE.
Let’s know briefly all of them.



Related Post:-

What is Sensex?

Sensex is a full name sensitive index but it is commonly known as Sensex.

Initially compiled in 1986 Sensex probably is most widely an index in India and here is how the perform Sensex.

In the stock exchange about 5500-6000 companies are listed out of these 6000 stock BSE select 30 complies to perform Sensex in other words BSE believes that these 30 companies are the best and brightest of all the listed stock how do you pick 30 stock to resent 6000 companies well for that BSE pick these stock on several criteria.


Selection criteria



         ·  Market capitalization

         ·   Trading Frequency

         ·  Average Daily Trades

         ·  Average Daily Turnover

         ·   Industry Representation

As of today, these 30 companies are part of Sensex. The price of Sensex is calculated based on the shares price of these 30 stocks.

So if the price of the majority of the 30 stocks is going up Sensex will also grow up and we will see at the market up or market is in green condition and if the share prices of the majority of these 30 stock are fall Sensex will also fall and we will see that the market is down or the market is in red condition.



What is Nifty?

Just like Sensex is the index of Bombay stock exchange (BSE). Nifty is an index of the national stock exchange (NSE).it’s full name is National stock exchange fifty because Nifty consists of 50 stocks but this long name is abbreviated to Nifty.

In the NSE there are almost 2000 companies are listed the exchange pick changes only 50 companies stock to become part of Nifty.

The selection criteria are pretty much the same as that of Sensex.

         · Market capitalization

         · Trading Frequency

         ·  Average Daily Trades

         · Average Daily Turnover

         · Industry Representation

As of today, these 50 stock are part of Nifty remember that all the big companies in India are listed on both the exchange therefore all the 30 Stock that constitutes Sensex is also Part of Nifty-Fifty.

Now Just because the company became part of Sensex and Nifty doesn’t mean that it will stay there forever the fact is that a very competitive environment and only the best-performing companies get to stay in the index.

Twice a year some companies get an exit in the index and new companies are added in the index. This process of keeping only the best and brightest of the companies in the index is also called Rebalancing.

For example, in the year 2018, these companies were added to Sensex and these companies were kept out.

So we understand what is index what are BSE and NSE Sensex and Nifty and how they get rebalance.



Stock Bulls represent the Share Marlet Condition the two bulls exist in the Indian market.

Bear Market:- if the market is continuously decreasing you see the red sign that means it is a bear market.

Bull Market:- if the market is continuously increasing you see the Green sign which means it is a Bull market.


How to calculate Sensex and Nifty

To calculate Sensex and Nifty there are lot’s of factor but I’ll give an overview of the three steps:-

Step-1

Market capitalization

We calculate the market capitalization of each of these stocks.

Market capitalization =Market Price *share outstands

This ensures that a company’s weight of an index.

Step-2

The market capitalization of a company can be broken down into two companies first is that of shares held by genuine like you and me and second is the shares held by the promoter.

The market capitalization of shares held by the general public like you and I are called free float Market capitalization and while calculating the index we only consider free-float market capitalization and not the promoter holding.

Step-3

Once we have a free-float market capitalization

Index=sum of free-float capitalization /Index value in Base Year

Now I hope you will exactly understand How Sensex and Nifty are calculated.


Difference between Nifty and Sensex:



There is a comparison chart about Nifty & Sensex who indicate the stock market index.

Now all you have known about the difference between Nifty and Sensex. Let’s determine all of the concepts in the form of Questions and answers to understand in an easy format.

Question-1

What is Index?

Answer-1

An index indicates the shares of the company to classify the Nifty and Sensex.

Question-2

What is Sensex?


Answer-2

A Sensex is a share index which is operated by BSE (Bombay Stock Exchange) on the top 30 companies. Which is selected in major sectors?

Question -3

What is Nifty?

Answer -3


A Nifty is a share index that is operated by NSE (National Stock Exchange) of the top 50 companies which are selected in major sectors.


Conclusion:-The overall the conclusion is BSE and NSE are the two major stock market indexes for share marketing in India, by using this we can know the difference between Nifty and Sensex and how they are calculated.


Warning:- Taxinvestcare advised you to do all kinds of investments during buying and selling shares in the presence of experts.


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1 Comments:

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Sarvesh
admin
January 16, 2020 at 1:12 AM

Share market

Congrats bro Sarvesh you got PERTAMAX...! hehehehe...
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