Difference between Nifty and Sensex
We have often heard the terms Nifty and Sensex, and every time when we turn on a business news channel it is Nifty and Sensex which mostly make the headlines. With the linear graphs, Red and Green arrows Nifty and Sensex appear most of the time when it comes to stocks market.
Being layman, it looks confusing to understand what could be the difference between the two when they both denote the same thing i.e. the movement of the stock market.
Before getting into the differentiation of Nifty and Sensex, let’s start with the basics of what Nifty and Sensex are, what NSE and BSE are, how they are different, their importance etc.
What is Nifty?
Nifty which is derived from National and Fifty is an equity benchmark index for the Indian Equity Market. It is one of the two major stock indices in India. Officially known as S&P CNX Nifty, it is operated by India Index Services and Products, which is a subsidiary of National Stock Exchange of India (popularly known as NSE).
Nifty was introduced by NSE on April 21, 1996. It represents the weighted average of 50 Indian Company Stocks across 24 sectors, which account for around 60% of the market capitalization.
How is Nifty calculated?
Nifty is calculated by free-float market capitalization weighted method. To do this calculation it also follows a mathematical formula to know the market capitalization. To derive the market capitalization, it multiplies equity with a price. While to derive free-float capitalization, equity capital which is multiplied by a price is further multiplied with IWF (Investible Weight Factors). IWF is a factor which determines the shares available for freely trading in the market. Nifty is determined on a daily basis by considering the current market value divided by base market capital, which is multiplied by Base Index Value of 1000.
What is Sensex?
Sensex which is derived from Sensitive and Index is an equity benchmark index for the Indian Equity Market. It is one of the two major stock indices in India. Officially known as S&P BSE Sensex, it is operated by Bombay Stock Exchange (popularly known as BSE).
Sensex was introduced by NSE on January 1, 1986. It represents the weighted average of 30 Indian Company Stocks across 13 sectors.
How is Sensex calculated?
Sensex is currently calculated by the free-floating method which came into existence from September 1, 2003. This is a variation of market capitalization method. It uses the company’s floating shares which are readily available for trading, which implies total capitalization minus Director’s shareholding. As per this methodology, Index level at any point of time depicts the free float market value of 30 constituent stocks relative to a base period.
Difference between Nifty and Sensex:
Although both Nifty and Sensex depicts the strength of the stock market, still both of them are different in the following ways:
Derived from:Nifty: Nifty is derived from National Fifty. It is also known as S&P CNX Nifty. Sensex: Sensex is derived from Sensitive Index. It is also known as S&P BSE Sensex.
Date of Commencement:
Nifty: Nifty came into existence on April 21, 1996.Sensex: Sensex came into existence on September 1, 2003.
Nifty: Nifty is operated by India Index Services and Products, which is a subsidiary of National Stock Exchange of India (NSE).Sensex: Sensex is operated by Bombay Stock Exchange (BSE).
Nifty: Nifty is based at NSE, whose corporate office is located at Exchange Plaza, Bandra Kurla Complex, Mumbai.Sensex: Sensex is based at BSE, located at Dalal Street, Mumbai.
Number of stocks it constitutes of:
Nifty: Nifty consists of 50 company’s stocks which are used to calculate the index.Sensex: Sensex consists of 30 company’s stocks which are used to calculate the index.
Number of sectors it covers:
Nifty: Nifty covers companies across 24 sectors. Sensex: Sensex covers companies across 13 sectors.
While both Nifty and Sensex are the important Stock Indices which determine the strength of the stock market. Though they have many similarities but are also different from one another in the above ways.
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Via:: Stock – India Infoline