Difference Between Sensex and Nifty: All about Indices
Knowledge and awareness about all stakeholders in the stock market is a must before you start investing. Stock exchange is the place wherein traders and brokers buy and sell shares, bonds, mutual funds, FDs, NCDs, etc. BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are the major stock exchanges in India and these provide a platform for the companies to raise capital. Investors also benefit as they get an opportunity to invest in these companies that can result in wealth creation. Government too can raise funds for developmental projects through the exchange.
What is an index?
Reading and constant monitoring of the stock market has to be done both by experienced novice investor as well. Firstly, we should know what index means. The stock exchanges comprise of several thousand companies. It is not possible to evaluate each and every stock to understand the market’s performance and so a certain set of companies representing various sectors are chosen and a group is made. This group is called as index. The companies are picked on the basis of free-float market cap.
Difference Between Sensex and Nifty:
In the stock world, Sensex and Nifty are the commonest terms that draw attention daily. You would have come across news like Nifty hits all-time high, Sensex crashes and so on. As investors, we should be aware of these indices and their importance. The movement of Sensex/Nifty is in accordance with the movement of stocks present in the index. There are so many factors that could influence the movement of stocks and in turn the index. For example, when there is an election result or when there is an escalation of trade war or when there is an announcement of a rate cut, Sensex and Nifty either surge or plummet. These simply indicate the investors’ sentiment. Nifty and Sensex are the barometers of the Indian economy. The markets’ good health simply means the investment culture in a country is in good condition. Let us know what the difference between sensex is and nifty.
What is Sensex?
Companies raise capital by IPO (Initial Public Offering) and after IPO gets over, these companies get listed on the stock exchanges such as BSE, NSE. This provides a greater opportunity for the public to buy these shares for the attainment of their short or long term goals.
Sensex is a combination of sensitive and index and it was introduced in 1986. It is the benchmark index of BSE and consists of 30 companies that are listed on BSE.
What is Nifty?
Nifty is derived from the term National Stock Exchange Fifty and it comprises of 50 companies that are traded on NSE. It is the benchmark index of NSE and was introduced in 1996.
Major factors that affect the performance of indices:
Stock markets are considered to reflect the state of the economy. Whenever there is a slowdown in the economy, there is sluggishness in the market too.
a. Change in interest rate:
When the interest rates are increased, the borrowing cost for companies increases. To compensate this, the companies cut their expenses in many ways. This affects the company’s earnings and as a result the stock markets fall.
b. Inflation rate:
When there is high inflation, investors do not have surplus amount that can be used for investment purposes. Companies also suffer as they should pass on the higher input costs to the consumers.
c. Global economy:
- A recession in global economy will affect the stock markets. Other factors that impact the stock market are crude oil prices, rupee depreciation, political instability, etc.
Difference between sensex and nifty:
|1||Full form||Sensitive & Index||National Stock Exchange Fifty|
|2||Benchmark index of||BSE||NSE|
|3||No. of companies||30||50|
|5||Owned by||BSE||NSE Indices Limited (formerly India Index Services & Products Ltd)|
The movement of stocks can be predicted by analyzing technical charts which keep track of the stock on regular time intervals. Once you have a proper understanding of what Sensex and Nifty is made up of, their weightage, the difference between sensex and nifty, it will be easy for you to trade in index.