Difference between Nifty and Sensex | Explain in simple words

Hi Friends in this blog I will Explain the difference between Nifty and Sensex In Simple Words, Nifty shorts for the Nifty 50 is a benchmark of the stock market index in India, introduced and managed by the National Stock Exchange (NSE). the National Stock Exchange (NSE) was established in 1992, NSE is the leading stock exchange in India, located in Mumbai, Maharashtra. In 1996 NSE Launched the Nifty 50 index, a benchmark index for the Indian stock market. the Sensex shorts for the sensitive index is the benchmark of the stock market index of the Bombay Stock Exchange (BSE), it was established in 1875 & it represents the performance of the top 30 companies listed on the BSE. So in this blog, we see the main difference between Nifty and Sensex in simple Words step by step.

1. Nifty (NSE).

Hi friends Let's see more information about nifty (NSE) for the following:

1.1 What is Nifty?

Nifty (short for "Nifty Fifty") is the flagship index of the National Stock Exchange (NSE). Officially known as the Nifty 50, it represents the weighted average performance of the 50 largest and most liquid companies listed on the NSE.

1.2 History and Introduction of Nifty (NSE) :

NSE introduced NIFTY in 1996.

The base year for NIFTY is 1995, and the base value is 1,000.

It tracks the performance of 50 companies across 20 sectors of the economy.

1.3 Trading time :

The NSE operates Monday to Friday, excluding public holidays.

• Pre-market session: 9:00 AM to 9:15 AM (IST)

• Regular trading: 9:15 AM to 3:30 PM (IST)

1.4 Calculation Methodology of Nifty :

NIFTY is adjusted using the free-float market capitalization method reflecting, the market value of readily marketable equity shares. The employed formulae are as follows;

Index Value = (Current Market Value / Base Market Capital) × Base Index Value

The base year is 1995, and the base index value is 1,000. So larger companies, having more shares available for the public, would impact the movement of the index to a greater extent.

1.5 Composition and Selection Criteria :

NIFTY comprises 50 companies of different sectors like financial services, information technology, consumer goods, etc. Companies are selected based on certain criteria:

• Free-Float Market Capitalization: Only the market value of shares available for public trading is considered. The holdings of promoters are not included.

• Liquidity: Companies should have a good trading volume and frequency.

• Trading Frequency: Trading has to be done continuously to be included in NIFTY.

• Sector Representation: The index will ensure a balanced representation across various sectors of the Indian economy.

1.6 Purpose of Nifty :

Tracks the performance of blue-chip companies.

Serves as a benchmark for mutual funds and portfolio performance.

Helps investors gauge market sentiment on the NSE.

1.7 Sub-Indices of Nifty:

The Nifty family includes sectoral and thematic indices such as:

• Nifty Bank: Tracks the top banking stocks.

• Nifty IT: Represents the IT sector.

• Nifty Next 50: Tracks the next 50 largest companies after the Nifty 50.

1.8 Importance of Nifty.

The NIFTY 50 is India's benchmark stock market index representing the top 50 companies listed on the National Stock Exchange (NSE). It is crucial for several reasons:

• Market Benchmark: Reflects the overall performance of the Indian stock market and serves as a reference for investments.

• Economic Indicator: Tracks the health of the economy through diverse sectors like IT, finance, and consumer goods.

• Investment Decisions: Guides investors and fund managers in making informed choices.

• Risk Diversification: Provides exposure to multiple sectors, reducing investment risk.

• Global Recognition: Attracts foreign investors and highlights India's market potential.

• Derivatives Trading: Basis for futures and options contracts, aiding hedging and speculation.

• Accessible to All: Enables retail investors to invest in top companies via index funds and ETFs.

1.9 How to Invest in NIFTY

One can invest in NIFTY's performance through:

• Index Funds: These are mutual funds that replicate the NIFTY 50 portfolio.

• Exchange-Traded Funds (ETFs): These trade like stocks and mirror the NIFTY 50.

• Derivatives: Futures and options on NIFTY for speculative and hedging purposes.

2. Sensex (BSE)

Let's see more information about nifty (NSE) for the following:

2.1 What is Sensex?

Sensex (short for "Sensitive Index") is the benchmark index of the Bombay Stock Exchange (BSE). It tracks the performance of the 30 largest and financially sound companies listed on the BSE.

2.2 History and Introduction of Sensex (BSE).

The SENSEX was launched in 1986 by the BSE.

The base year for SENSEX is 1978-79, and the base value is set at 100.

It tracks the performance of 30 companies from various industries that are considered representative of the Indian economy.

2.3 Trading time :

The BSE operates Monday to Friday, excluding public holidays.

• Pre-market session: 9:00 AM to 9:15 AM (IST)

• Regular trading: 9:15 AM to 3:30 PM (IST)

2.4 Calculation Methodology of Sensex :

The SENSEX value is calculated by comparing the current free-float market capitalization of the 30 constituent stocks with the base market capitalization (from 1978-79, with a base index value of 100).

SENSEX=(Current Free-Float Market Cap of 30 StocksBase Market Cap)×100\text{SENSEX} = \left( \frac{\text{Current Free-Float Market Cap of 30 Stocks}}{\text{Base Market Cap}} \right) \times 100SENSEX=(Base Market CapCurrent Free-Float Market Cap of 30 Stocks​)×100

2.5 Composition and Selection Criteria:

The SENSEX consists of 30 top-performing companies listed on the Bombay Stock Exchange (BSE), chosen based totally on the following criteria:

• Market Capitalization: Companies need to rank the various pinnacle through general and unfastened-drift market capitalization.

• Liquidity: Stocks should have excessive buying and selling volumes and average everyday turnover.

• Free-Float: An excessive percentage of shares need to be to be had for buying and selling.

• Listing History: The stock out to be listed on the BSE for at least one year.

• Sector Representation: Ensures various representation of key sectors.

• Track Record: Companies have to have strong economic and governance records

2.6 Purpose of Sensex :

Indicates the overall performance of the BSE.

Acts as a barometer of the Indian economy.

Used as a benchmark by fund managers and investors.

2.7 Sub-Indices of Sensex:

Similar to Nifty, Sensex has sectoral indices such as:

• BSE Bankex (banking sector).

• BSE IT (IT sector).

• BSE Midcap and Smallcap indices for smaller companies.

2.8 Importance of Sensex :

• Market Barometer: SENSEX serves as an indicator of overall market performance and investor sentiment.

• Economic Indicator: It reflects the health and growth trends of the Indian economy.

• Investment Benchmark: Used by fund managers and investors to measure the performance of their portfolios.

2.9 How to Invest in Sensex :

Investors can gain exposure to SENSEX through:

Index Funds: Mutual funds that replicate the SENSEX portfolio.

Exchange-Traded Funds (ETFs): Funds traded on the stock exchange that track the SENSEX.

Derivatives: Futures and options contracts based on SENSEX for speculative or hedging purposes.

3.Difference Between Nifty and Sensex

PARTICULARS	NIFTY (NSE)	SENSEX (BSE)
Full Form	National and Fifty	Sensitive and index
Situated	New Delhi	Mumbai
stock coverage	It consists of 50 selected stocks from the top 50 companies	It consists of 30 selected stocks from the top 30 companies
Ownership	It is owned by the National Stock Exchange (NSE)	It is owned by the Bombay Stock Exchange (BSE)
Benchmark index	Nifty 50 and S&P CNX Fifty	S&P BSE Index
Founded In	1995	1986
Number of sectors covered	24 Sectors Covered	13 Sectors Covered