Sensex and Nifty are two major stock market indices in India.
Sensex, also known as the S&P BSE Sensex, is a stock market index of 30 companies listed on the Bombay Stock Exchange (BSE). These 30 companies are representative of various sectors of the Indian economy and are chosen based on various criteria such as market capitalization, liquidity, and trading volumes. The Sensex is considered the benchmark index for the Indian stock market and is widely used by investors, traders, and fund managers to track the performance of the Indian stock market.
Nifty, also known as the Nifty 50, is a stock market index of 50 companies listed on the National Stock Exchange (NSE). Similar to the Sensex, the Nifty 50 index includes companies from various sectors of the Indian economy and is used as a benchmark for the Indian stock market. The Nifty 50 index is also used to create various index funds, exchange-traded funds (ETFs), and other financial products.
Both Sensex and Nifty are important indicators of the performance of the Indian stock market and are closely watched by investors and analysts. The movement of these indices is influenced by various factors such as domestic and global economic conditions, corporate earnings, government policies, and geopolitical events.
What are the differences between Sensex and Nifty?
The key differences between Sensex and Nifty are as follows:
Index composition: The Sensex is composed of 30 companies listed on the Bombay Stock Exchange (BSE), while the Nifty is composed of 50 companies listed on the National Stock Exchange (NSE). The companies included in these indices are selected based on various criteria such as market capitalization, liquidity, and trading volumes.
Weightage methodology: The Sensex is calculated using the free-float market capitalization-weighted methodology, which means that the weightage of each company in the index is proportional to its free-float market capitalization. On the other hand, the Nifty is calculated using the float-adjusted market capitalization weighted methodology, which means that the weightage of each company in the index is proportional to its float-adjusted market capitalization.
Sector representation: The Sensex represents companies from various sectors such as banking, energy, technology, and consumer goods, while the Nifty represents companies from broader sectors such as banking, IT, pharma, and automobiles.
Performance: The performance of Sensex and Nifty can differ significantly due to differences in their index composition and weightage methodology. For example, if a particular sector such as banking outperforms other sectors, it may have a greater impact on the performance of the Nifty compared to the Sensex.
Overall, both Sensex and Nifty are important indicators of the Indian stock market and are widely used by investors, traders, and fund managers to track the performance of the Indian economy.
How to Calculate Sensex?
The Sensex, also known as the S&P BSE Sensex, is calculated using the free-float market capitalization-weighted methodology. Here are the steps involved in calculating the Sensex:
Determine the base period: The base period for the Sensex is January 1, 1979, with a base value of 100. This means that the value of the Sensex on January 1, 1979, was 100.
Select the 30 companies: The Sensex is composed of 30 companies listed on the Bombay Stock Exchange (BSE). These companies are selected based on various criteria such as market capitalization, liquidity, and trading volumes.
Calculate the free-float market capitalization of each company: The free-float market capitalization of a company is calculated by multiplying its total market capitalization with the percentage of shares that are freely tradable in the market.
Calculate the market capitalization of the index: The market capitalization of the index is calculated by adding up the free-float market capitalization of all the 30 companies in the index.
Calculate the index value: The index value is calculated by dividing the market capitalization of the index by the base value of 100. This gives the index value as of the current trading day.
The formula to calculate the Sensex is as follows:
Sensex = (Total market capitalization of the index) / (Base value of 100)
Note that the Sensex is calculated in real-time during market hours and is updated every second based on the stock prices of the 30 companies in the index.
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How to Calculate Nifty?
The Nifty, also known as the Nifty 50, is calculated using the float-adjusted market capitalization-weighted methodology. Here are the steps involved in calculating the Nifty:
Determine the base period: The base period for the Nifty is November 3, 1995, with a base value of 1,000. This means that the value of the Nifty on November 3, 1995, was 1,000.
Select the 50 companies: The Nifty is composed of 50 companies listed on the National Stock Exchange (NSE). These companies are selected based on various criteria such as market capitalization, liquidity, and trading volumes.
Calculate the free-float market capitalization of each company: The free-float market capitalization of a company is calculated by multiplying its total market capitalization with the percentage of shares that are freely tradable in the market.
Calculate the float-adjusted market capitalization of each company: The float-adjusted market capitalization of a company is calculated by multiplying its free-float market capitalization with a factor that represents the proportion of shares that are available for trading in the market.
Calculate the total float-adjusted market capitalization of the index: The total float-adjusted market capitalization of the index is calculated by adding up the float-adjusted market capitalization of all 50 companies in the index.
Calculate the index value: The index value is calculated by dividing the total float-adjusted market capitalization of the index by the base value of 1,000. This gives the index value as of the current trading day.
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The formula to calculate the Nifty is as follows:
Nifty = (Total float-adjusted market capitalization of the index) / (Base value of 1,000)
Note that the Nifty is calculated in real-time during market hours and is updated every second based on the stock prices of the 50 companies in the index.