What is Nifty and Sensex? Basics of Stock Market Index

Do you carry any kind of interest in the share market? If yes, you might have heard of Dalal Street or D-street in movies, newspapers, and magazines. Well, it’s time to know more about it in this post which throws light on nifty and its role in the share market.

Dalal Street refers to the Bombay Stock Exchange in Mumbai, which is the biggest stock exchange in India and is home to a large number of shares of the country’s leading organizations. In the Hindi language, Dalal refers to a broker and the place where broking is done called a street.

What is Nifty and Sensex?

Before you get to know Nifty and Sensex, it is necessary to understand the functioning of Indian stock markets. There are two leading stock exchanges in India – the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

1. Bombay Stock Exchange

Bombay Stock Exchange is the oldest stock exchange not only in India but in Asia too. It is an inherent part of the “$1 trillion” club, having the 11th largest market capitalization worth $2.2 trillion. It was founded by Premchand Roychand in the year 1875 and is presently managed by Sethurathnam Ravi, who is working as its chairman.

Some amazing facts about Bombay Stock Exchange (BSE) are:

• Oldest stock exchange in India

• More than 5500 companies are listed on it

• 10th biggest stock exchange in the world in terms of overall market capitalization

• As of Feb 2021, 4,722 companies trading on the BSE were having value of more than Rs 200 Lakh Crore

• World’s fastest stock exchange with a median trade speed of 6 microseconds

What do you mean by Sensex?

As there are hundreds of thousands of companies are listed on the Bombay Stock Exchange, it becomes difficult to track every individual stock to examine the performance of the market. To make this possible, a small sample is obtained which is considered representative of the entire market. This sample is known an index and plays a big role in determining the exact performance of the stock market.

SENSEX

Also known as BSE 30, SENSEX refers to the market indexing of 30 reputed and financially stable companies listed on the BSE. If you want to deal with the best stock broker in India, you also need to know what Sensex is.

• These 30 companies are picked on the ground of the free-float market capitalization.

• These are various companies from the diverse sectors on behalf of a sample of big, liquid and demonstrative companies.

• The base year of Sensex is 1978-79 and the base value is considered 100.

• It is a sign of market movement.

• If Sensex takes a dive, this means that the stock price of a majority of stocks on the BSE has faced a slump. If Sensex rises, it means that most of the leading stocks in BSE was gone up during the specific time period.

Here are 30 companies chosen for collecting the sample.

Name Industry Weight

1. Reliance Industries Ltd. Integrated Oil & Gas 11.99%

2. HDFC Bank Ltd. Banks 11.84%

3. Infosys Ltd. IT Consulting & Software 9.06%

4. Housing Development Finance Corporation Ltd. Housing Finance 8.30%

5. ICICI Bank Ltd. Banks 7.37%

6. Tata Consultancy Services Ltd. IT Consulting & Software 5.76%

7. Kotak Mahindra Bank Ltd. Banks 4.88%

8. Hindustan Unilever Ltd. Personal Products 3.75%

9. ITC Ltd. Cigarettes,Tobacco Products 3.49%

10. AXIS Bank Ltd. Banks 3.35%

11. Larsen & Toubro Ltd. Construction & Engineering 3.13%

12. Bajaj Finance Ltd. Finance (including NBFCs) 2.63%

13. State Bank of India Banks 2.59%

14. Bharti Airtel Ltd. Telecom Services 2.31%

15. Asian Paints Ltd. Furniture,Furnishing,Paints 1.97%

16. HCL Technologies Ltd. IT Consulting & Software 1.89%

17. Maruti Suzuki India Ltd. Cars & Utility Vehicles 1.72%

18. Mahindra & Mahindra Ltd. Cars & Utility Vehicles 1.48%

19. UltraTech Cement Ltd. Cement & Cement Products 1.40%

20. Sun Pharmaceutical Industries Ltd. Pharmaceuticals 1.16%

21. Tech Mahindra Ltd. IT Consulting & Software 1.11%

22. Titan Company Ltd. Other Apparels & Accessories 1.11%

23. Nestle India Ltd. Nestle India Ltd. 1.07%

24. Bajaj Finserv Finance (including NBFCs) 1.04%

25. IndusInd Bank Ltd. Banks 1.03%

26. POWERGRID Electric Utilities 1.03%

27. Tata Steel Ltd. Iron & Steel/Interm.Products 1.01%

28. NTPC Ltd. Electric Utilities 0.94%

28. Bajaj Auto Ltd. 2/3 Wheelers 0.86%

30. Oil & Natural Gas Corporation Ltd. Exploration & Production 0.73%

2. National Stock Exchange (NSE)

The National Stock Exchange of India Limited (NSE) is the largest financial market in the country. Set up in 1992, the NSE has grown into a classy, digital stock market, which ranked fourth in the world in terms of equity trading volume. Trading in NSE started in 1994 with the release of the wholesale debt market and a cash market segment soon afterward.

Some startling facts about NSE are:

• India’s biggest financial marketplace and 4th largest in terms of trading volume

• Largest private wide-area network in the country

• First electronic exchange in India which boasts fully automated electronic trading

• Being the first electronic limit order book to trade derivatives and ETFs.

Nifty or Nifty 50

Nifty, also known as NIFTY 50, refers to the market index inclusive of 50 well-set and financially stable companies listed on the National Stock Exchange of India (NSE).

• The base year for NSE is 1995 and the base value is defined as 1000.

• Nifty is measured using 50 large stocks that are traded heavily on the NSE.

• These 50 companies are selected on the basis of the free-float market capitalization.

• The 50 top stocks are chosen from different 24 sectors.

• Nifty is owned and managed by India Index Services and Products (IISL)

List of 50 Companies listed under Nifty 50

1. Reliance Industries Ltd. Energy - Oil & Gas 10.77%

2. HDFC Bank Ltd. Banking 10.66%

3. Infosys Ltd. Information Technology 7.42%

4. Housing Development Finance Corporation Ltd. Financial Services 7.29%

5. ICICI Bank Ltd. Banking 6.59%

6. Tata Consultancy Services Ltd. Information Technology 4.86%

7. Kotak Mahindra Bank Ltd. Banking 4.16%

8. Hindustan Unilever Ltd. Consumer Goods 3.04%

9. AXIS Bank Ltd. Banking 2.87%

10 ITC Ltd. Consumer Goods 2.84%

11. Larsen & Toubro Ltd. Construction 2.78%

12. State Bank of India Banking 2.39%

13. Bajaj Finance Ltd. Financial Services 2.23%

14. Bharti Airtel Ltd. Telecommunication 2.13%

15. Asian Paints Ltd. Consumer Goods 1.64%

16. HCL Technologies Ltd. Information Technology 1.58%

17. Maruti Suzuki India Ltd. Automobile 1.46%

18. Mahindra & Mahindra Ltd. Automobile 1.23%

19. UltraTech Cement Ltd. Cement 1.13%

20. Sun Pharmaceutical Industries Ltd. Pharmaceuticals 1.03%

21. Wipro Ltd. Information Technology 0.97%

22. IndusInd Bank Ltd. Banking 0.96%

23. Titan Company Ltd. Consumer Goods 0.94%

24 Bajaj Finserv Ltd. Financial Services 0.93%

25. Nestle India Ltd. Consumer Goods 0.92%

26. Tata Motors Ltd. Automobile 0.92%

27. Tech Mahindra Ltd. Information Technology 0.91%

28. HDFC Life Insurance Co. Ltd. Insurance 0.88%

29. Power Grid Corporation of India Ltd. Energy - Power 0.88%

30. Dr. Reddy’s Laboratories Ltd. Pharmaceuticals 0.86%

31. Tata Steel Ltd. Metals 0.86%

32. NTPC Ltd. Energy - Power 0.83%

33. Bajaj Auto Ltd. Automobile 0.79%

34. Adani Port and Special Economic Zone Infrastructure 0.79%

35. Hindalco Industries Ltd. Metals 0.79%

36. Grasim Industries Ltd. Cement 0.74%

37. Divi’s Laboratories Ltd. Pharmaceuticals 0.68%

38. Hero MotoCorp Ltd. Automobile 0.67%

39. Oil & Natural Gas Corporation Ltd. Energy - Oil & Gas 0.65%

40. Cipla Ltd. Pharmaceuticals 0.64%

41. Britannia Industries Ltd. Consumer Goods 0.63%

42. JSW Steel Ltd. Metals 0.61%

43. Bharat Petroleum Corp. Ltd. Energy - Oil & Gas 0.58%

44. Eicher Motors Ltd. Automobile 0.56%

45. Shree Cement Ltd. Cement 0.56%

46. SBI Life Insurance Co. Insurance 0.54%

47. Coal India Ltd. Energy & Mining 0.51%

48. UPL Ltd. Chemicals 0.49%

49. GAIL (India) Ltd. Energy - Oil & Gas 0.42%

50. Indian Oil Corporation Ltd. Energy - Oil & Gas 0.40%

What does the movement of Nifty and Sensex mean?

Sensex and Nifty are considered the signs of stock market movement. If the Sensex or Nifty rise up, it refers that most of the stocks in India are gone up. For the top 10 stock brokers in India, the value of Nifty and Sensex is paramount. In regard to NIFTY and NSE, it can be derived that:

• If the Nifty surges, the stock price of all leading stocks on NSE has gone up.

• On the other side, if nifty takes a dive, the stock price of a majority of stocks on NSE has gone down.

The same formula applies to SENSEX. A rising Sensex means that the economy of the country is going up whereas a declining Sensex refers to a slow down.

Why market index is so important?

• The market indexes act as the barometer for market movement. It tends to give a typical impression about whether most of the stocks have gone up or gone down.

• Sometimes, Market Index is termed as a benchmark portfolio performance.

• It is utilized as a reflector of investor’s sentiments.

• Market indexes are primarily used for sorting and comparing the performance of different companies.

• Indices treat as a base for Index Funds, Index Futures, and Options.

• Utilized in passive fund management by Index funds.

• The index is meant to help in the comparison of returns on investments in stock markets as contrary to asset categories such as gold or debt.