Before you seek and opt for any enticing investment plan, it is imperative to know the comprehensive overview and profound knowledge about Sensex and Nifty.
We understand and value your hard-earned money is precious and not ought to be wasted just because of any lack of information or awareness. Before we inform you about Nifty and Sensex, it is vital to know about Index.
What is an Index?
Numerous companies are listed on the stock exchange. It is challenging to keep a track, analyze, and evaluate every stock to understand the market’s performance at a time. Hence, this arises the need to take a sample of a defined group of companies that represents different sectors in the market, based on which a group is made, and that group represents the entire market. This small sample taken is known as Index, which helps in gauging the stock market’s value section. The index is calculated from the selected stock price.
Now, you might be thinking that what is the criteria used to select the companies for a testing sample is? They are picked based on free-float market capitalization techniques. We will discuss about free-float market cap further in this guide.
We want to provide you with extensive information and brief you about the complete guide that you need to know before you hop into any of these two vast streams, whether it is Nifty or Sensex.
What exactly are Nifty and Sensex?
Basics About Sensex
Its full form is Sensitive Index, which was introduced in 1986. Sensex is the benchmark index of the Bombay Stock exchange and comprises 30 companies. Sensex is the indicator of market movement and the financial conditions of the companies.
The base value of Sensex is set to 100 and is calculated on a free-float market capitalization methodology along with the performance of individual crucial stocks.
The price of the Sensex tells you the price of the stocks which are listed on the BSE. Higher is the price; more expensive stocks will cost and vice-versa.
You might be wondering what companies do in order to get listed in these stock exchanges like BSE or NSE? The companies raise capital by IPO (Initial Public Offering), which provides an opportunity for the general public to buy the shares of those companies as per their knowledge, requirements, goals. Many companies raise IPO but only a few are selected based on their financial soundness and performance. Also, the companies that are representatives of multiple industrial sectors become part of these stock exchanges.
Mentioned below are the 30 companies under BSE Sensex:
|1||HDFC Bank Ltd.||Banks||11.92%|
|2||Reliance Industries Ltd.||Petroleum Products||11.48%|
|3||Housing Development Fin. Corp. Ltd.£||Finance||9.14%|
|5||ICICI Bank Ltd.||Banks||6.8%|
|6||Tata Consultancy Services Ltd.||Software||6.25%|
|7||Hindustan Unilever Ltd.||Consumer Non-Durables||5.35%|
|8||Kotak Mahindra Bank Limited||Banks||4.98%|
|9||ITC Ltd.||Consumer Non-Durables||4.77%|
|10||Larsen and Toubro Ltd.||Construction Project||3.2%|
|11||Bharti Airtel Ltd.||Telecom – Services||2.9%|
|12||Axis Bank Ltd.||Banks||2.83%|
|13||Asian Paints Limited||Consumer Non-Durables||2.45%|
|14||State Bank of India||Banks||2.41%|
|15||Nestle India Ltd.||Consumer Non-Durables||1.89%|
|16||Maruti Suzuki India Limited||Auto||1.86%|
|17||Bajaj Finance Ltd.||Finance||1.79%|
|18||HCL Technologies Ltd.||Software||1.55%|
|19||Titan Company Ltd.||Consumer Durables||1.27%|
|20||Sun Pharmaceutical Industries Ltd.||Pharmaceuticals||1.24%|
|21||Power Grid Corporation of India Ltd.||Power||1.22%|
|22||UltraTech Cement Limited||Cement||1.19%|
|24||Tech Mahindra Ltd.||Software||1.14%|
|25||Mahindra & Mahindra Ltd.||Auto||0.89%|
|26||Bajaj Auto Limited||Auto||0.86%|
|27||Oil & Natural Gas Corporation Ltd.||Oil||0.7%|
|28||Indusind Bank Ltd.||Banks||0.69%|
|29||Hero MotoCorp Ltd.||Auto||0.67%|
|20||Tata Steel Ltd.||Ferrous Metals||0.66%|
Basics About Nifty
Nifty was introduced after the Sensex in 1996. It comprises 50 companies under the National Stock Exchange of India from 24 different sectors and is the broad index of NSE. The selection of the companies is based on the free-float market capitalization technology, just like Sensex.
NSE launched Nifty 50 index futures trading on TAIFEX in the year 2016, which was formerly known as CNX Nifty. Nifty is managed and owned by IISL (India Index Services and Products).
The base value of Nifty is set to 1000 and has been awarded numerous awards over the past few years. If we talk about the total capitalization of all the companies that are listed in the NSE is Rs. 1,22,82,127 crore.
NSE has numerous indices under multiple categories, such as strategy indices, broad market indices, thematic indices, sectoral indices, and fixed income indices.
Listed below are the 50 companies under NSE Nifty:
|1||HDFC Bank Ltd.||Banks||10.46%|
|2||Reliance Industries Ltd.||Petroleum Products||10.09%|
|3||Housing Development Fin. Corp. Ltd.£||Finance||7.91%|
|5||ICICI Bank Ltd.||Banks||5.87%|
|6||Tata Consultancy Services Ltd.||Software||5.38%|
|7||Kotak Mahindra Bank Limited||Banks||4.86%|
|8||Hindustan Unilever Ltd.||Consumer Non-Durables||4.6%|
|9||ITC Ltd.||Consumer Non-Durables||4.2%|
|10||Larsen and Toubro Ltd.||Construction Project||2.8%|
|11||Bharti Airtel Ltd.||Telecom – Services||2.76%|
|12||Axis Bank Ltd.||Banks||2.4%|
|13||State Bank of India||Banks||2.12%|
|14||Asian Paints Limited||Consumer Non-Durables||2.1%|
|15||Bajaj Finance Ltd.||Finance||1.64%|
|16||Nestle India Ltd.||Consumer Non-Durables||1.63%|
|17||Maruti Suzuki India Limited||Auto||1.6%|
|18||HCL Technologies Ltd.||Software||1.33%|
|20||Power Grid Corporation of India Ltd.||Power||1.14%|
|21||Titan Company Ltd.||Consumer Durables||1.09%|
|22||Sun Pharmaceutical Industries Ltd.||Pharmaceuticals||1.07%|
|23||Dr Reddys Laboratories Ltd.||Pharmaceuticals||1.06%|
|24||UltraTech Cement Limited||Cement||1.05%|
|25||Tech Mahindra Ltd.||Software||0.98%|
|26||Britannia Industries Ltd.||Consumer Non-Durables||0.89%|
|27||Coal India Ltd.||Minerals/Mining||0.82%|
|29||Bajaj Finserv Ltd.||Finance||0.78%|
|30||Mahindra & Mahindra Ltd.||Auto||0.76%|
|31||Bajaj Auto Limited||Auto||0.74%|
|32||Bharat Petroleum Corporation Ltd.||Petroleum Products||0.71%|
|33||Oil & Natural Gas Corporation Ltd.||Oil||0.7%|
|34||Shree Cement Ltd.||Cement||0.66%|
|36||Indusind Bank Ltd.||Banks||0.59%|
|37||Hero MotoCorp Ltd.||Auto||0.58%|
|38||Indian Oil Corporation Ltd.||Petroleum Products||0.58%|
|39||Tata Steel Ltd.||Ferrous Metals||0.57%|
|40||Adani Ports & Special Economic Zone||Transportation||0.54%|
|41||Grasim Industries Ltd.||Cement||0.53%|
|42||Eicher Motors Ltd.||Auto||0.51%|
|44||JSW Steel Ltd.||Ferrous Metals||0.42%|
|45||GAIL (India) Ltd.||Gas||0.4%|
|46||Hindalco Industries Ltd.||Non – Ferrous Metals||0.39%|
|47||Bharti Infratel Ltd.||Telecom – Equipment & Accessories||0.38%|
|48||Tata Motors Ltd.||Auto||0.36%|
|49||Vedanta Ltd.||Non – Ferrous Metals||0.33%|
|50||Zee Entertainment Enterprises Ltd.||Media & Entertainment||0.32%|
|51||Yes Bank Ltd.||Banks||0%|
Also Read: 12 Best Stock Market Trading Apps In India
About BSE and NSE
BSE is located at Dalal Street, Mumbai, Maharashtra. It is an Indian Stock exchange that was established in 1875 and comprehensively known to be Asia’s oldest stock exchange.
It has an astounding high speed and is considered to be the world’s fastest stock exchange with a median trade speed of 6 microseconds.
As for now, more than 5400 companies are listed on the BSE.
NSE is also located in Mumbai, Maharashtra, India, and is known to be the leading stock exchange in India, which was established in 1992 with the primary objective of ending the monopoly of BSE in the Indian Stock Market.
NSE is the first demutualized electronic exchange in India that provides a contemporary, fully automated screen-based electronic trading system facilitating the trading options for all investors across the country.
NSE is diligently used by investors not only in our country but all over the world, making its total market capitalization of more than 2.27 trillion USD. It is considered to be the 11th largest stock exchange in the world.
What is Free-float Market Capitalization?
The term market capitalization is the combined worth of various stocks of multiple companies enumerated in the stock exchange, be it BSE or NSE. Market capitalization clearly demonstrates the potential and accountability of the company in the open market, along with the market’s notion of its upcoming prospects. It reflects and highlights what all investors are amendable to spend money on its stock.
Market capitalization is computed by multiplying the number of shares issued by the company by the current market price of its one share. It is mandatory to provide BSE with all the information within every three months in a given format based on which free floater factor is derived from the information.
Market capitalization helps in determining the companies competence, size, as opposed to using total assets or sales figures.
Free float means all those shares which are open for trading. As only a limited number of shares can be free-float, not all of them. As some may be pledged, or some might be under the government’s holdings. Those locked-in shares are not considered free-floating.
Free float market cap is calculated by multiplying the number of shares issued with the price of one share, whereas it does not perceive the shares issued by the government, promoters, or insiders.
Significance of Market Index
Market Index holds utmost importance in the market movement and is beneficial in many ways, such as:
- Market Index is used as a reflector of investor’s activities and desire
- It is often used as a benchmark portfolio performance
- The entire market of the nation relies on Market Index. Hence, it is considered as a barometer to ensure the market movement has gone upward or downwards
- It is used for fund management by index funds
- It acts as an underlying for Index Futures, Index Funds, and Options
- It is a platform which is used to compare and manage several companies listed under BSE and NSE
- It also provides a precise and reliable data to compare returns on investments in stock markets in contrast to the assets classes such as debt or gold
Can you Invest In Sensex?
Yes, definitely you can. But before that mentioned below are some of the facts about this gigantic stock exchange market:
- Investing in Sensex can prove out to be a considerable advantage if your purchased shares move upwards to a greater extent
- Usually, all stocks in Sensex are financially sound. Many of the companies are blue-chip, and it is advisable to invest in equity funds that invest in these shares
- If the market is elusive and Sensex is experiencing major shifts in its stock values, it is recommended to wait till the time market, as well as the index, gets stable
- It can provide you huge financial assistance if you make prudent decisions while investing in the selected companies after gauging the market movement considering all factors
Can you Invest in Nifty?
Certain factors should be painstakingly reviewed, and only then it is advisable to invest in Nifty:
- Index funds of Nifty ETF’s (Exchange Trading Fund) can be tried investing in if you want to avoid a taxable event which entirely diminishes daily redemption costs
- These funds are a good option that one can invest in if you’re going to enjoy the long term benefits. Nifty is not only well-diversified but relatively steady
- Similar to Sensex, Nifty’s sticks are financially sound, too, as most of them are Blue chip companies. So, always have an open and recommended option to invest in equity funds.
What is SGX Nifty?
SGX Nifty is the derivative of CNX Nifty that implies the stock traded in Singapore Stock Exchange Nifty. SGX Nifty helps foreign investors by allowing them to take a position in the Indian market. SGX Nifty starts a bit early at 6:30 am and ends at 11:30 pm, whereas Nifty operates between 9:15 am to 3:30 pm.
Factors Responsible for Index’s Performance
The stock markets usually determine the state of the economy. More will be the prices of the stocks; better will be the state of the economy. Moreover, when sluggishness is perceived in the shares, the economy is analyzed and predetermined to be in a slowdown.
Although there are a couple of factors responsible for the movement of Index price, however, listed below are the predominant reasons that lead to the upward or downward movement in the market:
Global Economy: An overall recession in the national and international markets is an indication for the stock markets that the price of each share will go drastically down. Some other factors which are equally responsible for the movement of stock market prices include political instability, devaluation of your country’s currency, crude oil prices, etc.
Interest Rate: When an economy experiences a sudden increase in the interest rates on the borrowings, the costing of every company, organization, and business increases, with the increase in overall costing, various sectors cut their expenses in the possible ways. This not only adversely affects the earnings of each sector but also leads to the fall down in the stock prices.
Inflation Rate: With the increase in inflation, the purchasing power of the companies, businesses, and consumers declines terribly. In this situation, investors remain with a limited amount of money and are not capable of investing in businesses. Similarly, the companies suffer from the lack of funds and significant backlash, which pass on the higher input cost to the consumers. Inflation leads to the fall in all stocks and bond prices.
Difference Between Sensex and Nifty
It is manifested from the above-mentioned chart that both the stock exchanges target large-cap stocks. Apart from this, there is not even a considerable difference between the performance of Sensex and Nifty from 20 years. Both of them are robust barometers that indicate market strength and competence.
For your reference, we have drawn this chart to demonstrate the comparison based on specific grounds between Sensex and Nifty:
|1||Full form||Sensitive & Index||National Stock Exchange Fifty|
|2||Owned by||BSE||NSE Indices Limited (formerly India Index Services & Products Ltd)|
|3||No. of companies||30||50|
|4||Benchmark index of||BSE||NSE|
We hope through this post helped you in getting acquainted with all the information that you need to know about Sensex and Nifty. Once you go through this post, you will have a proper understanding of both the stock exchange. Now, you are all set to invest in the stock market that caters to all your requirements.
If you are still struggling and have any questions bothering you, please feel free to mention them in the comments section below.