Often we all keep hearing about Sensex and Nifty on TV, Newspaper or any other place. There is a lot of discussion about their ups and downs on TV channels and newspapers every day. On the other hand, have you ever found out about Sensex and Nifty? And what is the difference between them? If not, then today we are going to tell you about this. Let’s know in detail –
Sensex is an index of BSE i.e. Bombay Stock Exchange. The 30 largest companies of 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, Infosys. Sensex has fluctuated in a couple of seconds.
The Sensex was launched on 1 January 1986. It includes a total of 30 companies. For this reason it is also known as BSE 30. The fluctuations of the Sensex show that what is the position of the country’s big companies and the stock market?
Nifty comes under National Stock Exchange. It is the index of NSE. A total of 50 companies of the country are indexed in Nifty. These companies are selected from 12 different sectors of the country. Nifty is a combination of the words ‘national’ and ’50’. Nifty is also known as Nifty 50.
It was started in 1994. The volatility in the Nifty gives an idea about the market in which direction its trend is going.
The top 50 stocks that comprise the Nifty 50 are from 12 different sectors. Some of these include information technology, consumer goods, financial services, automobiles, telecommunications, etc.
The companies to meet the following parameters and criteria to be part of 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: The float-adjusted market capitalisation of the company must be at least twice that of the current smallest index composition.
Domicile: The company must be listed on the National Stock Exchange NSE and be an Indian company.
3. Let us know what is the special difference between Sensex and Nifty?
- Sensex comes under Bombay Stock Exchange. Whereas Nifty is an index of the National Stock Exchange.
- There are 30 companies indexed within the Sensex. At the same time, a total of 50 companies have been included in Nifty.
- The base value of Sensex is 100. Whereas Nifty’s 1000.
4. Major factors that affect the performance of indices
Often the stock market reflects the state of the country’s economy. During an economic slowdown, there is often some sluggishness in the market too.
Following are some of the factors that affect the performance of the indices:
- Interest Rate
With interest rate changes, the stock market index experiences ups and downs. For example, when the government increases the interest rates, the borrowing cost of the companies increases. And, as a result, the company tries to cut their expenses. Therefore, this may have a negative impact on the company’s earnings and on the share prices.
- Inflation Rate
Inflation also has an impact on the stock market indices. For example, when inflation is high, individuals do not have the surplus amount that they can use for investments. Hence reducing the investment power. Also, companies suffer from it too. The higher input costs of the company are passed on to the customers. These directly impact sales and have an impact on the company’s earnings. As a result, there is an affect on the share prices as well.
- Global Economy
The equity markets are affected by a global economic slowdown. Furthermore, the other factors that impact the stock market performance are currency exchange rates (rupee movements), crude oil prices, political instability, etc.
Also read: Kisan Vikas Patra (KVP) : Know Everything
5. Which is better, NSE or BSE?
NSE and BSE are stock exchanges in India. The Bombay Stock Exchange (BSE) is India’s oldest stock exchange. In comparison, the National Stock Exchange (NSE) is the biggest stock exchange in India. NSE has high trade volumes in comparison to BSE. In other words, in NSE, there are more active buyers and sellers. Also, NSE has higher liquidity. It makes trading easy and offers more opportunities for investors to convert stocks to money.
On the other hand, BSE is a gigantic pool of stocks. There are numerous companies that are part of BSE. Also, all stocks that are part of NSE are a part of BSE as well. Furthermore, in the derivatives segment, NSE is a monopoly with Nifty. NSE Nifty and Bank Nifty are the ones that are highly traded.
Therefore, BSE is more suitable for beginners, while traders and seasoned investors mostly prefer NSE. Also, for an investor looking to invest in new companies, then the ideal choice is BSE. However, for traders who deal in futures and options, derivatives NSE is the ideal choice.