SENSEX vs NIFTY: A complete overview

sensex vs nifty Indexes

Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are the two leading stock exchanges operating in India. Both exchanges are entirely electronic, with over 7,000 businesses. Millions of trades are conducted on both exchanges every day. SENSEX and NIFTY are the well-known indices for every trader that represents the market.

This article will guide you to understand these two indexes’ details better. Also, you’ll know what the NIFTY and SENSEX are, their differences, how to find today’s SENSEX and NIFTY, and much more useful information. First, let’s look at the definition of a stock index.

What are NIFTY and SENSEX?

sensex and nifty
With the sheer number of companies listed through BSE and NSE platforms, it’s almost impossible to track the changes in the market. Therefore, the exchanges created the concept of indexes to facilitate the process – SENSEX and NIFTY. A glance at these indexes suffices to determine the market’s direction.

An index refers to a meticulously selected list of companies traded on an exchange. The companies featured in the index typically span multiple industries and sectors within the economy. In addition, the companies included in the Index are usually established and have a solid reputation in their field or industry.

Since indexes include companies from all major industries and sectors, it is widely recognized as one of the most reliable economic performance indicators. Apart from investing in stocks of companies, it is also possible to invest in various mutual funds.

Let’s look at the two most essential indexes in India, the SENSEX and NIFTY.

What is SENSEX?

bse sensex index
The term SENSEX came from the word ‘sensitive’, and Index was invented by Deepak Mohini, a financial journalist in India. It is believed that the SENSEX serves as the standard Index for the Bombay Stock Exchange (BSE). Some traders define SENSEX as the name ‘S&P BSE SENSEX’. The BSE market is available in Hindi and English.

The BSE SENSEX was launched in 1986. SENSEX is the oldest Indian stock index. It comprises the top 30 companies listed within the BSE in various industries and sectors.

What is NIFTY?

nse nifty index
The NIFTY is the benchmark index for NSE, also known as the National Stock Exchange Fifty. The Index was introduced in 1996, and sometimes it’s called the ‘NIFTY share market’.

The NSE NIFTY comprises most of the top companies from diverse industries and sectors listed on the NSE. It is a large-cap index that can provide liquidity and trade through stock exchanges. They account for around 70-75% of the market value in India.

Let’s dig a little more into these two indices to learn about the differences between them.

What is the main difference between NIFTY and SENSEX??

The primary distinction that separates SENSEX and NIFTY is the number of companies considered a sample. SENSEX feels 30 companies are for sampling, whereas NIFTY is a 50-company sample.

SENSEX:

  • The BSE SENSEX is the benchmark index for the Bombay Stock Exchange.
  • Incorporated in 1986, it’s the longest-running stock index in India.
  • SENSEX comes from the combination of words ‘sensitive and index’.
  • The index comprises the top 30 companies listed on BSE.
  • The index of stocks includes companies that are spread across 13 different industries.
  • The base value used in the calculation of the index is 100.
  • The base year of the base to calculate SENSEX is 1978-1979.

NIFTY:

  • NSE NIFTY is the benchmark index. NIFTY serves as the index that defines the National Stock Exchange.
  • The index was introduced in 1996. NIFTY is a relatively recent index of stocks.
  • NIFTY comes from the combination of the words ‘national and fifty’.
  • The NIFTY comprises the top 50 companies listed on the BSE, and all of them are well-known.
  • The NIFTY contains companies from 24 different industries.
  • The base value used in the calculation of the index is 1000.
  • The year of the base in the calculation of NIFTY is 1995.

Now you have comprehensive information about SENSEX and NIFTY – broad market indices and benchmarks of the equity market.

Current SENSEX and NIFTY

Indian benchmark equity indexes NIFTY and SENSEX were sluggish and extended losses to the 7th consecutive session.

Affected by the rising price of oil and the escalating geopolitical tensions between Russia and Ukraine and massive sell-offs, BSE SENSEX recorded its 4th most severe fall in history and the steepest single-day drop in history.

The benchmarks for the headline gauges NIFTY, and SENSEX closed 4.8 percent and 4.7 percent lower, respectively. That’s the steepest decline since May 2020.

SENSEX vs NIFTY today

sensex vs nifty
The NIFTY 50 companies are large caps that are reputable businesses with excellent growth projections and high profits, and efficient management. They have stable returns with lower risk and are ideal for compounding. In a bullish market, the increase in the value of NIFTY is lesser than SENSEX.

The same words about stability and reputation can be said about the 30 companies included in the SENSEX list. Moreover, in a bullish market, top companies push their index value higher. You can see how the indexes behave today live on the BSE or NSE. No doubt, it would be helpful to watch the statistics for a month or more to make your own conclusions and decide what can be trusted more today – SENSEX or NIFTY.

Conclusion

NIFTY contains the top 50 companies that actively trade today on the National Stock Exchange. NIFTY uses the free-float market capitalization-weighted method. It’s not a secret – SENSEX is also based on free-float market capitalization. The only difference between, it comprises the top 30 companies that trade daily on the Bombay Stock Exchange.

It is possible to invest in stocks outside the biggest and trusted companies; however, higher returns come with greater risk since some small-cap companies aren’t popular. Smaller companies are not always well-managed or have higher projected growth rates in the future.

We’d suggest that you pick top-quality companies or those with lower risk to get high returns instead of getting higher returns with higher risk.

Rate article
Online Investment
Add a comment