What is Sensex and Nifty ?

What is Sensex and Nifty ?

Credit:Source thise image frm Google

hello everyone stock market has majorly about buying and selling of shares but the question is where does this process take place the answer is the stock exchange in simple words the stock exchange is a market that facilitates both the buyer and seller of stocks the give and take of shares between the buyer and seller take place in the stock exchange in India we have two main stock exchanges established in 1875 the Bombay Stock Exchange has more than 5,000 companies listed under it and established in 1992 the national stock exchange has more than 1,600 companies if you think

practically it is not possible to analyze the performance of the market by tracking so many firms on a day to day basis this is why the indices were introduced since X is the main index of BSE and nifty is the main index of NSE does in India so as to know how the market is performing you do not need to track all the listed companies rather just by looking at the main indices nifty and Sensex you can conclude whether the market is up or down you must be thinking how to know when the market is up or down it's quite easy when the nifty and Sensex are indicated by green color it implies the stock market is up whereas when both indices are indicated by red color it implies the stock market is down the green colour of nifty and Sensex tells that the indices are above the closing value of the previous trading day the red color shows that the indices are below the closing value of the previous trading day let us move forward and know more about these two important indices Sensex is basically a combination of two words sensitive and index and nifty is a combination of national and fifty nifty consists of 50 well-established firms that belong to a range of sectors which have a good track record in terms of performance it is also called fifty/fifty the movement of nifty depends on the price

fluctuations of these 50 companies similarly Sensex involves 30 listed firms that belong to different sectors its movement depends on the price fluctuations of these 30 firms one of the main features of both the indices is that almost all the major sectors are covered because they consist of companies that are is performance of their respective sector the stock market performance is indicated majorly by these two indices apart from nifty and Sensex there are other sectoral indices two sectoral indices consist of firms that are top layers of their respective sectors like banking IT manufacturing pharmaceuticals oil and gas etc for instance if you wish to track the performance of the banking sector you can look for indices Bank X of BSE or Bank nifty of NSE Stock Exchange also consists of separate small cap or mid cap indices like S&P BSE small cap S&P BSE mid cap nifty mid cap 50 etc further nifty and Sensex are treated as the benchmark in the Indian stock market this implies that by comparing his or her investment returns with nifty and Sensex one can easily conclude whether your investment has incurred good returns or not for example in 2019 sense X gave approximately 14% return where as nifty gave approximately 12% return now if your investment portfolio in 2019 gave more return as compared to both these benchmarks then you can say that your investments performed well while if the return incurred by your investments was lower then it underperformed as compared to put the benchmark similarly if one has invested in the banking sector then he or she can compare the investment returns with the return given by pancakes of BSE or Bank nifty of NSE you all must be wondering how Sensex and nifty are calculated when the calculation Sensex and nifty is done using the method of free float market capitalization since X is actually the weighted average of the free float market capitalization of the 30 companies likewise nifty is a weighted average of the free float market capitalization of the 50 firms it consists off on the practical front you need not get into the complication of its calculation as an investor your focus mainly lies in the movement of the benchmark indices if any stock underperforms consistently

in Nifty or sense x then the stock exchange can replace that particular stock with a constantly well performing stock the final decision in this regard is made by the stock exchange just like one can get an overview of the Indian stock market through nifty and Sensex similarly you can know how the stock market of other nations are performing through their main indices for example one of the main indices of the Tokyo Stock Exchange of Japan is Nikkei and it can help you to get an idea about the performance of the same we hope that now you have a total understanding of nifty and Sensex if you liked the video