What is Nifty and Sensex? Basics of Stock Market Index! |

By Trader Pit

July 9, 2021


This article is intended for those who have just started investing in stocks, and is intended for people who have little or no knowledge about Nifty Index and Sensex.

I come from a humble background. I was born in a small village in India, and spent most of my early life in a small town called Kalyan near Mumbai. I didn’t get to see much of the city, due to my family’s financial struggles. My family was a very average family. We did not have much money, but we were not too poor. We had a good home, a decent car, two loving parents, and two older sisters who always used to tease me. I was always considered an ‘odd’ child by my two sisters, but they never bullied me or anything. My Mother and Father were wonderful people, they were extremely loving and supportive to each other. They had a lot of dreams for

A complete guide to the Nifty and Sensex: Have you ever heard the name Dalal Street or D-Street mentioned in a news channel or financial magazine? I’m sure you’ve heard of it, if you have anything to do with the financial world.

Dalal Street in Mumbai, India, is home to the Bombay Stock Exchange, India’s largest stock exchange, and several related companies and financial institutions. When the Bombay Stock Exchange was moved to a new location at the intersection of Bombay Samachar Marg and Hammam Street, the street next to the building was renamed Dalal Street.

In Hindi, Dalal means mediator. The term Dalal Street is used in the same way as Wall Street in the United States, to refer to the country’s major stock exchanges and the financial system as a whole.

To understand the Nifty and the Sensex, one must first understand the Indian equity markets. Let’s look at the two main Indian stock exchanges, the Bombay Stock Exchange and the National Stock Exchange, and their indices.

1. Bombay Stock Exchange (BSE)

  1. The Bombay Stock Exchange is an Indian stock exchange located on Dalal Street in Mumbai, Maharashtra.
  2. It was established in 1875 and is the oldest stock exchange in Asia.
  3. It is the fastest stock market in the world, with an average trading speed of 6 microseconds.
  4. More than 5,500 companies are listed on the BSE.
  5. The BSE is the 10th largest stock exchange in the world with a total market capitalization of $2.29 trillion in April 2018.
  6. In February 2021, the value of 4,722 companies traded on the BSE exceeded Rs 200 lakh crore (2,0047,191.31 crore), the exchange’s data showed.

What is an index? Since there are thousands of companies listed on the stock market, it is very difficult to track each stock to assess the performance of the market at any given time. Therefore, a smaller sample representative of the whole market is taken. This small sample is called an index and is used to measure the value of a portion of the stock market. The index is calculated on the basis of individual share prices.

– SENSEX

The Sensex, also known as the BSE 30, is a stock index of 30 established and financially strong companies listed on the Bombay Stock Exchange (BSE).

  1. 30 companies were selected based on their free float market capitalization.
  2. These are various companies from different sectors which form a sample of large, liquid and representative companies.
  3. The base year for the Sensex is 1978-79 and the base value is 100.
  4. It is an indicator of market movements.
  5. When the Sensex falls, it indicates that the price of most major BSE stocks has fallen. If the Sensex is rising, it means that most of the major stocks of the BSE have risen during this period.

For example, let’s say the Sensex stands at 49,130 today. If the Sensex falls to 48,450 tomorrow, it would mean that most of the 30 companies are performing poorly, which means that their share prices will fall.

– List of 30 companies included in the Sensex

These are the Sensex 30 companies – Sensex 30 parts by weight – 2021

 

  Name Industry Weight
1. Reliance Industries Ltd. Integrated oil and gas industry 11.99%
2. HDFC Bank Ltd. Banks 11.84%
3. Infosys Ltd. Computer and software consultancy 9.06%
4. Housing Development Finance Corporation Ltd. Financing of housing 8.30%
5. ICICI Bank Ltd. Banks 7.37%
6. Tata Consultancy Services Ltd. Computer and software consultancy 5.76%
7. Kotak Mahindra Bank Ltd. Banks 4.88%
8. Hindustan Unilever Ltd. Personalized products 3.75%
9. ITC Ltd. Cigarettes, tobacco products 3.49%
10. AXIS Bank Ltd. Banks 3.35%
11. Larsen & Toubro Ltd. Construction and mechanical engineering 3.13%
12. Bajaj Finance Ltd. Finance (including NBFC) 2.63%
13. State Bank of India Banks 2.59%
14. Bharti Airtel Ltd. Telecommunication services 2.31%
15. Asian Paints Ltd. Furniture, coatings, paint 1.97%
16. HCL Technologies Ltd. Computer and software consultancy 1.89%
17. Maruti Suzuki India Ltd. Motor vehicles and commercial vehicles 1.72%
18. Mahindra & Mahindra Ltd. Motor vehicles and commercial vehicles 1.48%
19. UltraTech Cement Ltd. Cement and cement products 1.40%
20. Sun Pharmaceutical Industries Ltd. Pharmaceutical products 1.16%
21. Tech Mahindra Ltd. Computer and software consultancy 1.11%
22. Titan Company Ltd. Other clothing and accessories 1.11%
23. Nestlé India Ltd. Nestlé India Ltd. 1.07%
24. Bajaj Finserv Finance (including NBFC) 1.04%
25. IndusInd Bank Ltd. Banks 1.03%
26. POWERGRID Utilities 1.03%
27. Tata Steel Ltd. Iron and steel/intermediate products 1.01%
28. NTPC Ltd. Utilities 0.94%
28. Bajaj Auto Ltd. 2/3 Kolesnikov 0.86%
30. Oil & Natural Gas Corporation Ltd. Exploration and production 0.73%

2. National Stock Exchange (NSE)

The National Stock Exchange (NSE) is India’s premier stock exchange and is headquartered in Mumbai, Maharashtra, India. It was established to end the Bombay Stock Exchange’s monopoly on the Indian market.

  1. The NSE was established in 1992 as the country’s first electronic exchange with listing.
  2. It was the first exchange in the country to offer a state-of-the-art, fully automated electronic trading system based on screens, allowing investors across the country to trade at their convenience.
  3. The NSE has a total market capitalization of over $2.27 trillion, making it the 11th largest stock exchange in the world as of April 2018.
  4. The NSE index, NIFTY 50, is used by investors in India and the rest of the world as a barometer of the Indian financial market.
  5. In 2020, the NSE remains the world’s largest derivatives exchange in terms of number of contracts traded for the second year in a row.

READ ALSO

BSE and NSE – Why two scholarships in India?

– NIFTY or Nifty 50

The Nifty, also known as the NIFTY 50, is a stock index of 50 established and financially strong companies listed on the National Stock Exchange of India (NSE).

  1. The base year is assumed to be 1995, and the base value is set to 1000.
  2. The Nifty is calculated on the basis of 50 large cap shares actively traded on the NSE.
  3. 50 companies are selected based on their free float market capitalization.
  4. Here the 50 best stocks from 24 different sectors are selected.
  5. The Nifty is owned and managed by India Index Services and Products (IISL).

Also read : Nifty 50 Newsletter

– Nifty 50 companies – Nifty 50 parts by weight – 2021

 

  Name Industry Weight
1. Reliance Industries Ltd. Energy – Oil and Gas 10.77%
2. HDFC Bank Ltd. Bank 10.66%
3. Infosys Ltd. Information Technology 7.42%
4. Housing Development Finance Corporation Ltd. Financial Services 7.29%
5. ICICI Bank Ltd. Bank 6.59%
6. Tata Consultancy Services Ltd. Information Technology 4.86%
7. Kotak Mahindra Bank Ltd. Bank 4.16%
8. Hindustan Unilever Ltd. Consumer Goods 3.04%
9. AXIS Bank Ltd. Bank 2.87%
10 ITC Ltd. Consumer Goods 2.84%
11. Larsen & Toubro Ltd. Construction 2.78%
12. State Bank of India Bank 2.39%
13. Bajaj Finance Ltd. Financial Services 2.23%
14. Bharti Airtel Ltd. Telecommunications 2.13%
15. Asian Paints Ltd. Consumer Goods 1.64%
16. HCL Technologies Ltd. Information Technology 1.58%
17. Maruti Suzuki India Ltd. Automotive industry 1.46%
18. Mahindra & Mahindra Ltd. Automotive industry 1.23%
19. UltraTech Cement Ltd. Cement 1.13%
20. Sun Pharmaceutical Industries Ltd. Pharmaceutical products 1.03%
21. Wipro Ltd. Information Technology 0.97%
22. IndusInd Bank Ltd. Bank 0.96%
23. Titan Company Ltd. Consumer Goods 0.94%
24 Bajaj Finserv Ltd. Financial Services 0.93%
25. Nestlé India Ltd. Consumer Goods 0.92%
26. Tata Motors Ltd. Automotive industry 0.92%
27. Tech Mahindra Ltd. Information Technology 0.91%
28. HDFC Life Insurance Co Ltd. Insurance 0.88%
29. Power Grid Corporation of India Ltd. Energy – Energy 0.88%
30. Dr. Reddy’s Laboratories Ltd. Pharmaceutical products 0.86%
31. Tata Steel Ltd. Metal 0.86%
32. NTPC Ltd. Energy – Energy 0.83%
33. Bajaj Auto Ltd. Automotive industry 0.79%
34. Adani Port and Special Economic Zone Infrastructure 0.79%
35. Hindalco Industries Ltd. Metal 0.79%
36. Grasim Industries Ltd. Cement 0.74%
37. Divi’s Laboratories Ltd. Pharmaceutical products 0.68%
38. Hero MotoCorp Ltd. Automotive industry 0.67%
39. Oil & Natural Gas Corporation Ltd. Energy – Oil and Gas 0.65%
40. Cipla Ltd. Pharmaceutical products 0.64%
41. Britannia Industries Ltd. Consumer Goods 0.63%
42. JSW Steel Ltd. Metal 0.61%
43. Bharat Petroleum Corp Ltd. Energy – Oil and Gas 0.58%
44. Eicher Motors Ltd. Automotive industry 0.56%
45. Sri Cement Ltd. Cement 0.56%
46. SBI Life Insurance Co. Insurance 0.54%
47. Coal India Ltd. Energy and mining industry 0.51%
48. UPL Ltd. Chemical Products 0.49%
49. GAIL (India) Ltd. Energy – Oil and Gas 0.42%
50. Indian Oil Corporation Ltd. Energy – Oil and Gas 0.40%

Quick tip: If you want to learn more about the fundamentals of these companies, you can check out our Stock Research and Analysis PORTAL here.

Value of Nifty and Sensex movements

The Sensex and Nifty are indicators of market movements. If the Sensex or the Nifty is rising, it means that most stocks in India have risen during that period.  The following can be said about NIFTY and NSE:

  1. When the Nifty rises, it means that the price of most of the important NSE stocks has risen.
  2. On the other hand, if the Nifty falls, it means that the price of most of the important stocks on the NSE has fallen.

The same goes for the sensex. Similarly, when the Sensex/Nifty reaches a high level, it is an indication of the economic growth of the country. If it continues to drop, it could mean a slowdown or depression.

 

Short note
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For example, during the Indian recession of 2008-09, the Sensex index fell by over 12 000 points (-60%). The decline in the Sensex was similar to that of the recession. It means that people were selling their stocks and there was an economic crisis in the country.

Similarly, during the Covid19 pandemic, the market fell by 33% in a month, again due to the deteriorating economic scenario in India and the rest of the world.

 

Also read :

Market index Significance

  1. Stock market indices are a barometer of market behavior. It gives a general idea of whether most stocks are rising or falling.
  2. A market index is often used as a measure of portfolio performance.
  3. It is used as a reflection of investor sentiment.
  4. Market indices are used to sort and compare different companies.
  5. Indices are the basis for index funds, index futures and options.
  6. They are used in the passive management of index funds.
  7. The index can be a means of comparing the return of investments in the stock markets with that of asset classes such as gold or bonds.

If you are new to stock trading and want to learn it from scratch, here is a great 7-day online course: HOW TO INVEST IN INDIAN STOCK MARKET. Sign up now and start your stock market journey today (it’s FREE) #Happy Investing.

That’s it. I hope this post What is Nifty and Sensex helpful to the readers. Please comment below if you have any concerns. Have a great day and enjoy your investments!

Hello, my name is Kritesh (Tweet me here), I am a certified fundamental equity analyst with NSE and an electrical engineer (NIT Warangal) by profession. I am passionate about stocks and have spent the last four years researching, investing and teaching people how to invest in the stock market. That’s why I like to share my knowledge with you. #HappyInvesting

Frequently Asked Questions

What is Sensex and Nifty for beginners?

Sensex is the Indian stock market index, while Nifty is the Indian stock market index. They are both market indices that are used to measure the performance of the Indian stock market. What is the difference between Sensex and Nifty? The Sensex is an index that is used to measure the performance of the Indian stock market. The Nifty is an index that is used to measure the performance of the Indian stock market.

What is stock market Nifty Sensex?

The Nifty is a stock market index of the Indian companies listed on the Bombay Stock Exchange (BSE).

What is nifty and sensex in simple words?

Nifty is a term used in the Indian stock market to refer to the National Stock Exchange of India Limited (NSE) Index. Sensex is a term used to refer to the Bombay Stock Exchange (BSE) Index.

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About the author

Trader Pit

A yogi who like Finance and Technology. I have been in Indian Stock market for over 12 years now as financial analyst, portfolio manager, trader. Now, I focus on Yoga, Financial Education & Long term investing. 

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