What is Sensex and Nifty in 2022
If you want to earn money by trading or investing in share market but you do not have complete knowledge of Sensex and Nifty then you can never earn money from share market because Sensex and Nifty are two very important parts of share market. Often you must have heard or seen this in TV or newspaper like-
1]Sensex went up so many points today,
2]Today there was a huge fall in Sensex and Nifty,
3]The investors suffered huge losses due to the fall of Sensex and Nifty.
4]So why is it shown in the news and why is it so popular ?
That is probably because you can know the condition of the stock market only by looking at Sensex and Nifty, you can find out whether the market will go up or down today. That is why it is very important for you to have complete knowledge about Sensex and Nifty.
After reading this post, all the questions you have about Sensex and Nifty will be answered like;
What is Sensex and Nifty,
What is the difference between Sensex and Nifty,
Why Sensex and Nifty rise and fall,
How Sensex and Nifty work,
How many and which companies are in Nifty and Sensex Come,
How are Sensex and Nifty formed and how to calculate them?
Can the same company be listed in both BSE and NSE?
Today we are going to tell you the answers of all these questions in very easy language by example, then definitely read this post till the end. I guarantee you that after reading this post, you will not have any question related to Sensex and Nifty left in your mind.
Table of Contents
What are Sensex and Nifty?
Sensex and Nifty is a benchmark index of top companies of India which reflects the performance of the country’s largest companies. Based on the performance of these top companies, the price of Sensex and Nifty increases or decreases.
Simply put, Sensex and Nifty are such numbers or numbers or there is a value which shows the fluctuations in the stock market, this value is called Sensex or Nifty. By its increase or decrease, it is known that the biggest companies of the country are making profit or loss.
If the Sensex or Nifty rises or goes up or there is a jump in it, then it means that the biggest companies of the country are making profit and due to this increase, the share price of these companies also increases. And at the same time it is said that the Sensex has risen so much today that investors have profited and that profit is also because the people who have bought the shares of these top big companies, when their share price increases. So they can earn profit by selling the shares.
Conversely, when the Sensex or Nifty falls or goes down or falls, it means that the biggest companies of the country are incurring losses and the share price of these companies is going down. And at the same time it is said that today there was a huge fall in Sensex and Nifty due to which people lost crores.
So now you must have understood that why people lose or gain crores due to the rise or fall of Sensex and Nifty. That’s because with the rise of Sensex and Nifty, the price of the stock increases and with the decrease, the price of the stock decreases.
We will also tell you further why this Sensex and Nifty are decreasing or increasing, apart from this, there are many other things, keep reading further-
What is Sensex and Nifty
Before understanding Sensex and Nifty, you have to understand Stock Exchange and Index because Sensex and Nifty are also index or benchmark of BSE and NSE.
What are stock exchanges?
As we know stock market is a place where we buy and sell stocks of companies, there are two markets to buy and sell stocks in India, first Bombay Stock Exchange (BSE) and second National Stock Exchange (NSE).
Top companies of India are listed on these two stock exchanges and then we buy their shares. Every company has the right whether it has to be listed on BSE or on NSE. If the company wants, it can also be listed on both the exchanges. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) come in the list of top 10 stock exchanges in the world.
There are more than 5000 companies listed in BSE, out of which only 500 companies are such which alone account for 90% of the entire market capitalization while more than 1600 companies are listed in NSE.
Just as there are two main stock exchanges in India, BSE and NSE, in the same way there are stock exchanges in the international market like “New York Stock Exchange” in America and “Japan Exchange Group” in Japan, so they are different in big countries too. There is a different stock exchange and every stock exchange has a different index like Nifty and Sensex like Japan’s index name is “Nikkei 225”
Why were Sensex and Nifty created?
Now suppose you have to find out how high or low the share market is today compared to yesterday, then you will have to work very hard. First of all, you have to see the share price of all the companies, how much was their price yesterday and how much has happened today, then you will have to total it and then by comparing the price of yesterday and today, you will know whether the stock market is up or down today.
There is really a lot of hassle in this work because if you have to find out the condition of the market, at what speed the market is growing or going down, then there will be a lot of problem to find out and to deal with this problem, Sensex and Nifty has been created. You can find out how companies are performing just by looking at them.
What is Index in Sensex and Nifty?
Sensex and Nifty are themselves an index i.e. index of top companies of India. Sensex is the index of top companies of Bombay Stock Exchange and Nifty is index of top companies of National Stock Exchange.
Index means by making a list of India’s top companies, Top 30 or Top 50 companies, and then taking the average of the total market cap of all those companies, we are shown a value and that value is called Sensex or Nifty. .
To find out the economic development of any country, it is estimated by looking at the performance of the shares of the top companies of that country, thousands of companies are listed in the stock market, so if we want to know the performance of the market, then every single company at a time. It is difficult to track the stock of the company, so that is why a sample is taken of all the companies, which represents the entire market and we call this sample ‘index’.
We call the index of BSE as Sensex and the index of NSE as Nifty.
What is sensex?
Sensex meaning : Sensex is made up of words Sensitivity and Index which is also called sensory index in Hindi. Sensex was started from 1986 and at that time the base value of Sensex was ₹ 100 and today it is around ₹ 60,000 so you can guess at what speed Sensex is growing.
As its name suggests, it shows the sensitivity of the market. Sensitivity means what is the thinking of people about the market because people’s thinking has a great effect on the market, if people think that a stock will go very high, then they start buying it very quickly, due to which the price of the share increases. Like when people think negatively about a stock, its share price goes down.
Sensex is made up of 30 largest companies of different sectors of India. Eg: Health sector, Finance sector, Education sector etc.
Now you will think that there are only 30 companies in it, then how can it tell the sensitivity of the whole market because there are thousands of companies in the market. So your question is absolutely correct.
And the answer to this question is that if you look at the market cap of the Sensex, then you will come to know that this top 30 or top 50 companies cover almost 50 percent of the entire stock market and the same happens with Nifty because in that too. There are only 50 companies which are the biggest companies in India.
Sensex is also called BSE30 because within it only top 30 companies are selected out of 5500 companies listed in BSE, based on their market capitalization, some big companies which are listed in BSE like: Infosys, ITC, Hero Etc.
What is Nifty?
Nifty meaning : Nifty word is made up of National and Fifty ie ’50’ of National stock exchange. Fifty is because Nifty is made up of top 50 companies of India. Nifty was started in 1994 and its base value was kept at ₹ 1000 and today the value of Nifty is more than ₹ 16000.
If we look at the market cap of these top 50 companies, it is equal to the market cap of other thousands of companies because it is the most liquid company in India. Liquid company means a company in which a large amount of shares are bought and sold. And you can easily buy or sell the stocks of these companies.
Because there are many such small stocks in India whose shares you cannot buy or sell, so when you place an order to buy them, your order goes into pending. That is why avoid buying such stocks and always invest your money in a good company, if possible, buy stocks of these top 50 companies only.
Nifty is also called Nifty50 because the top 50 companies come inside it.
Why do Sensex and Nifty rise and fall?
Sensex and Nifty also fluctuate on the basis of Demand and Supply rule.
For example: Suppose when a company earns a good profit, the demand for the shares of that company increases a lot in comparison to its supply, due to which the price of the share also increases and when the company loses then the demand for its shares is less. Due to which the price of its share goes down.
Exactly the same happens in the price of Sensex and Nifty, but the only difference is that it shows the entire market, due to decrease or increase, the entire market becomes up or down. When the market goes up i.e. there is a jump in the points of Sensex or Nifty then it is called Bull Market and when the market goes down ie Sensex and Nifty fall in value then it is called Bear Market.
Why Sensex Changes During Budget?
You must have noticed one thing that when the budget is announced, there are a lot of fluctuations in the Sensex, then if the budget is positive for the market, then the Sensex and Nifty go up and when the budget is for the market. If it is negative then it goes down.
Can the same company be listed on both BSE and NSE?
Yes, of course, any company can be listed on both the BSE and NSE exchanges. Let us understand this through an example:
Example: When you buy a product online, you have all other websites from where you can buy it like amazon and flipkart, then that same product is available on both websites, then on whichever website you find that product and its price right. You buy from there.
In the same way, you get to see the shares of the same company on both NSE and BSE, now you have the choice from where you want to buy. Meaning that a company can be listed on more than one stock exchange and its share price can be different everywhere because it completely depends on the buyers and sellers.
Just as the price of the same thing is different in every market, similarly the share price of the same company is seen differently in BSE and NSE also.
How are Sensex and Nifty calculated?
Before 2003, Sensex and Nifty were calculated on the basis of ‘Market Capitalization’ of the companies but since 2003 it is calculated on the basis of ‘Free Float Market Capitalization’.
Before understanding what is Free Float Market Capitalization, you should know about Market Capitalization.
Market Capitalization: Suppose there is an ABC company whose Total Shares are 500. Out of these 500 shares, 400 shares are for general public and the remaining 100 shares are with the promoters and owners of the company and the price of each share is ₹ 100, then the total valuation of the company will be
Total shares × Price per share which means 500 ×100 = ₹ 50000 is the total value of that company, this is called Market Capitalization.
Free Float Market Capitalization means that the shares of Promoters or Owners of that company are not counted whereas in Market Capitalization the shares of Retail Investor i.e. Public as well as Shares of Owners of the company are also added.
What is the difference between Sensex and Nifty?
Although both Sensex and Nifty are the index of top 30 and top 50 companies of India and both tell us about the movement in the stock market but still there are some differences between these two which are as follows-
Sensex is the index of Bombay Stock Exchange while Nifty is the index of National Stock Exchange.
Sensex comes under top 30 companies of BSE while Nifty comes under top 50 companies of NSE.
Base year 1995 while calculating Nifty And the Base Value is taken as 1000 while the Base year 1979 and Base Value 100 are taken while calculating the Sensex.
Conclusion (Sensex and Nifty)
If you have come here, I hope that all your confusion about Sensex and Nifty will be cleared and you must have got the answer of all your questions like: What are Sensex and Nifty, what is the difference between them and How do you calculate them?
But if you still have any question then you can ask us in the comment box given below and if you found the information helpful, then share this post with your friends who want to learn about share market.
