Know the Difference Between Nifty & Sensex Online in India | Espresso

Difference Between Nifty and Sensex

Sensex and Nifty are two words that have become synonymous with stock markets in India. Even people who are not active stock investors are aware of Sensex and Nifty as stock market indices.

 

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But what is a stock market index? What are the different types of indices? What is the difference between Sensex and Nifty? Let’s find out.

What is a Stock Market Index?

You can understand an index as an indicator of a collection of similar items. With respect to the stock market, an index is a measure of the performance of a basket of securities. The stock exchange has thousands of listed stocks. Tracking and analyzing all of them is not possible. Hence, stocks with similar features are grouped together, and their performance is tracked using an index.
Know More about Stock Market Indices

There are various types of stock market indices in India like:

  • Broad market indices: including large and most liquid stocks on the exchange. Nifty and Sensex are two broad market indices.
  • Sectoral indices: including stocks from a specific sector of the market like S&P BSE Power, Nifty Bank Index, etc.
  • Market-cap-based indices: including stocks of companies having certain market capitalization, such as Large-cap, Mid-Cap and Small-Cap.

Difference Between Sensex and Nifty

Sensex and Nifty are broad market indices and are also called benchmark indices. Sensex is of the Bombay Stock Exchange (BSE), and Nifty is of the National Stock Exchange (NSE). Here is the difference between Sensex and Nifty:

Particulars Sensex Nifty
Name Sensex is also known as Sensitive Index Nifty is also known as National Fifty Index
Owned By Sensex is owned by the Bombay Stock Exchange (BSE) Nifty is owned by Index and Services and Products Limited (IISL) – a subsidiary of the NSE
Base Price The base price of Sensex is 100 The base price of Nifty is 1000
Base Year The base year of Sensex is 1978-79 The base year of Nifty is 1995
How many stocks are in the index? Sensex has the 30 most actively traded stocks on the BSE Nifty has the 50 most actively traded stocks on the NSE
How many sectors are covered by the index? Sensex covers around 13 sectors Nifty covers around 24 sectors
Foreign Exchanges the Index is traded on Sensex is traded on the stock exchanges of BRICS nations and the EUREX Exchange Nifty is traded on the Chicago Mercantile Exchange and the Singapore Stock Exchange

Calculation of Sensex and Nifty

Here is the calculation of Sensex and Nifty:

Sensex The market capitalization of each company included in the index is calculated. This is then converted into free-float market capitalization by multiplying it by the free-float factor. The total free-float market capitalization of all 30 companies is then divided by the index divisor of 100.

Nifty The market capitalization of each company included in the index is calculated. This is then converted into free-float market capitalization by multiplying it by the Investable Weight Factor or IWF. The index value is determined by dividing the current market value by the base market capital of Rs. 2.06 trillion and multiplying the result by 1000.

Importance of Sensex and Nifty

  • Since Sensex and Nifty are indicators of the behaviour of the market prices of stocks, they provide a quick view of the overall sentiment of stock investors.
  • There are many Mutual Funds that benchmark the performance of their portfolio against these indices.
  • You can compare the performance of various stocks against Sensex or Nifty to assess their performance.
  • Sensex and Nifty can offer a quick view of the comparison of returns offered by stock markets as opposed to gold, debt, etc.
    Know More about Sensex & Nifty in Detail

Frequently Asked Questions

The base price is used to indicate growth, and the base year is the year with which the values of the other years are compared. In Sensex, the base year is taken as 1978-79, and the base price is 100. Let’s say that in 1980, if the Sensex was at 120, then the market grew at a rate of 20% from 1979 to 1980. Currently, Sensex is at 58,500. This means that the market grew at a CAGR of around 16-17%.

There are two simple ways of investing in indices like the Sensex and Nifty:

  • You can buy stocks in the same weightage as in the index.
  • You can invest in Index Mutual Funds.

To invest directly, you would need a sizeable corpus as most of the stocks included in these indices belong to the top-performing companies from various sectors and have high market prices. If you have a smaller corpus, then an Index Mutual Fund can be a good option.

Sensex is a broad-market index comprising of the 30 most actively traded stocks on the BSE. The companies are selected based on the free-float market capitalization. It is considered to be an indicator of the overall movement of stock prices in the BSE.