What is Nifty and Sensex: Difference Between Nifty and Sensex
Nifty and Sensex are two critical indices for the Indian stock market. In this article, we will understand Nifty and Sensex and their differences.
The Sensex and Nifty are India's two national stock market indices. Whether you are an avid stock market follower or an investor, you are likely to turn up across these two terms to dominate the news stories of financial gateways, business news channels, and pink papers almost every day.
So, what are the Sensex and Nifty? What role do they play in the stock market?
Are you curious? Let us decode the Sensex and Nifty for ourselves.
What exactly is a stock index?
A stock index is a highly curated list of companies listed on an exchange. The companies that appear in the index typically represent a cross-section of the economy's sectors and industries. In addition, the companies in a stock index are generally well-established and portray their industry or sector.
Because an index includes companies from almost all major sectors and industries, it is primarily viewed as one of the most significant predictors of an economy's performance. Aside from investing in companies, you can also engage in stock indexes across various mutual fund schemes.
Let us now look at the country's two major indices, the Sensex and the Nifty. Continue to know what is nifty and Sensex.
What exactly is Sensex?
Mr Deepak Mohoni, a stock market analyst, coined the term Sensex, derived from Sensitive and Index. It is a Bombay Stock Exchange (BSE) index. Sensex comprises 30 companies based on their liquidity, market capitalisation, revenue, and diversification. A company must also be listed on the BSE on the Sensex.
It is one of India's oldest indices, and it is widely regarded as a measure of market performance and a reflection of the Indian economy. It is used as a standard to assess the growth and development of the Indian economy and industry and understand the stock market pattern.
The Sensex index includes the top 30 stocks. The index's value is determined by the price movement of the traded assets. The rise in the value of the Sensex is due to the increase in the prices of the majority of the securities. While a drop in the value of the index is caused by a decline in the cost of the majority of the underlying securities.
What exactly is Nifty?
The Nifty, also known as National Stock Exchange Fifty, is the National Stock Exchange's benchmark index (NSE). The index was launched in 1996 and is also known as the CNX Nifty and the Nifty 50 by traders. The Nifty comprises the top 50 companies listed on the NSE from various sectors and industries. The index represents large-cap companies traded on stock exchanges and have a high degree of liquidity. These firms account for roughly 70-75 per cent of India's total market capitalisation.
To be included in the Nifty 50, companies must meet the following variables and criteria:
Liquidity:
In the previous six months, the stock should have traded at an average price of 0.50 per cent or less.
Float Modification:
The company's float-adjusted market capitalisation must be at least 2 times that of the most minor index structure.
Domicile:
The company is an Indian company listed on the National Stock Exchange NSE.
Conclusion
Remember that Index only includes companies that have performed exceptionally well in the previous three months. That means that the shares will be pretty expensive if you want to invest in them once it is listed. As a result, it may no longer have a lot of room for growth. It could also be overpriced now that it's widely known.
However, only if you can predict the winners ahead of time will you be able to maximise your profits. As a result, it's highly beneficial to recognise the companies that will be mentioned next year. Don't compare your portfolio returns to the Sensex or the nifty in the short term.
It is always a good idea to research quality equities because there are many good stocks in mid-cap and small-cap companies that are undervalued and could be added to the index in the years ahead.
That concludes this article. We hope we were able to provide you with helpful information about what is nifty and Sensex, and it helped you comprehend Sensex and Nifty. If you enjoyed this article and want to learn more about these topics, please visit our blog, as we have an entire series dedicated to it.