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What is Nifty and Sensex? Basics of Stock Market Index!

What is Nifty and Sensex? Basics of Stock Market Index!

What is Nifty and Sensex? Stock Market Basics (For Beginners) cover image

A Complete Guide on what is Nifty and Sensex: Have you ever heard of the name Dalal street or the D-Street on any market news channel or financial magazine? I’m sure, you definitely would have heard of it, if you’re even remotely involved in the finance world.

Well, Dalal Street in Mumbai, India is the address of the Bombay Stock Exchange, the biggest stock exchange in India, and several related financial firms and institutions. When the Bombay Stock Exchange was moved to this new location at the intersection of Bombay Samāchār Marg and Hammam Street, the street next to the building was renamed Dalal Street.

In Hindi Dalal means “a broker”. The term “Dalal Street” is used in the same way as “Wall Street” in the U.S., referring to the country’s major stock exchanges and overall financial system.

What is Nifty and Sensex?

In order to understand what is Nifty and Sensex, you need to understand the Indian stock exchanges first. Now, let’s discuss the two major stock exchanges in India i.e the ‘Bombay stock exchange’ and the ‘National stock exchange’ along with their indexes.

1. Bombay Stock Exchange (BSE)

  1. Bombay stock exchange is an Indian stock exchange located at Dalal Street, Mumbai, Maharashtra.
  2. It was established in 1875 and is Asia’s oldest stock exchange.
  3. It is the world’s fastest stock exchange, with a median trade speed of 6 microseconds.
  4. As of Feb 2022, 5,246 companies trading on the BSE were worth over Rs 264 Lakh Crore (Rs 26,451,334.95 Cr), as per data available on the exchange.

What is an Index? Since there are thousands of company listed on a stock exchange, hence it’s really hard to track every single stock to evaluate the market performance at a time. Therefore, a smaller sample is taken which is the representative of the whole market. This small sample is called Index and it helps in the measurement of the value of a section of the stock market. The index is computed from the prices of selected stocks.

— SENSEX

Sensex, also called BSE 30, is the market index consisting of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE).

  1. The 30 companies are selected on the basis of free-float market capitalization.
  2. These are different companies from the different sectors representing a sample of large, liquid, and representative companies.
  3. The base year of Sensex is 1978-79 and the base value is 100.
  4. It is an indicator of market movement.
  5. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE has gone down. If Sensex goes up, it means that most of the major stocks in BSE went up during the given period.

For example, suppose the Sensex is 49,130 today. If Sensex drops to 48,450 tomorrow, it means that the majority of the 30 companies are not performing well i.e. their share price is falling. 

— List of 30 Companies Consisting of Sensex

Here is the Sensex 30 Companies- Constituents of Sensex 30 by Weights – 2022

SL Company Industry Weight
1 Reliance Ind Integrated Oil & Gas 13.36%
2 HDFC Bank Banks 9.65%
3 ICICI Bank Banks 8.78%
4 Infosys IT Consulting & Software 8.70%
5 HDFC Personal Products 6.51%
6 TCS IT Consulting & Software 5.13%
7 Kotak Mahindra Bank Banks 4.23%
8 ITC Cigarettes,Tobacco Products 4.10%
9 HINDUSTAN UNI Housing Finance 3.72%
10 Larsen & Toubro Construction & Engineering 3.37%
11 State Bank of India Banks 3.11%
12 Axis Bank Banks 3.05%
13 Bajaj Finance Holding Companies 2.63%
14 Bharti Airtel Telecom Services 2.62%
15 Asian Paints Furniture,Furnishing,Paints 2.18%
16 Maruti Suzuki Cars & Utility Vehicles 1.85%
17 Mahindra & Mahindra Cars & Utility Vehicles 1.78%
18 HCL Technologies IT Consulting & Software 1.54%
19 Titan Co Other Apparels & Accessories 1.53%
20 Sun Pharma Pharmaceuticals 1.49%
21 Bajaj Finserv Finance (including NBFCs) 1.22%
22 Tata Steel Iron & Steel/Interm.Products 1.19%
23 UltraTech Cement Cement & Cement Products 1.18%
24 Power Grid Electric Utilities 1.13%
25 NTPC Electric Utilities 1.12%
26 Nestle Packaged Foods 1.07%
27 Tech Mahindra IT Consulting & Software 1.03%
28 Wipro IT Consulting & Software 0.96%
29 IndusInd Bank Banks 0.95%
30 Dr Reddy’s Labs Pharmaceuticals 0.84%

2. National Stock Exchange (NSE)

The National Stock Exchange (NSE) is the leading stock exchange in India, located in Mumbai, Maharashtra, India. It was started to end the monopoly of the Bombay stock exchange in the Indian market.

  1. NSE was established in 1992 as the first demutualized electronic exchange in the country.
  2. It was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system that offered an easy trading facility to investors spread across the length and breadth of the country.
  3. NSE has a total market capitalization of more than US$ 3.06 trillion, making it the world’s 9th-largest stock exchange as of April 2018.
  4. NSE’s index, the NIFTY 50, is used extensively by investors in India and around the world as a barometer of the Indian capital markets.
  5. The NSE remained the world’s largest derivatives exchange for the second consecutive year in 2020 in terms of the number of contracts traded.

ALSO READ

BSE and NSE – Why are there two Stock Exchanges in India?

— NIFTY or Nifty 50

Nifty, also called NIFTY 50, is the market index consisting of 50 well-established and financially sound companies listed on the National Stock Exchange of India (NSE).

  1. The base year is taken as 1995 and the base value is set to 1000.
  2. Nifty is calculated using 50 large stocks that are actively traded on the NSE.
  3. The 50 companies are selected on the basis of free-float market capitalization.
  4. Here, the 50 top stocks are selected from 24 different sectors.
  5. Nifty is owned and managed by India Index Services and Products (IISL)

 

Also read: Nifty 50 fact sheet

— Nifty 50 Companies – Constituents of Nifty 50 by Weights – 2022

Sl No Company Industry Weightage
1 Reliance Industries Ltd. OIL & GAS 12.94%
2 HDFC Bank Ltd. FINANCIAL SERVICES 8.55%
3 Infosys Ltd. IT 7.73%
4 ICICI Bank Ltd. FINANCIAL SERVICES 7.11%
5 Housing Development Finance Corporation Ltd. FINANCIAL SERVICES 5.68%
6 Tata Consultancy Services Ltd. IT 4.89%
7 Kotak Mahindra Bank Ltd. FINANCIAL SERVICES 3.53%
8 ITC Ltd. FMCG 3.46%
9 Hindustan Unilever Ltd. FMCG 2.88%
10 Larsen & Toubro Ltd. CONSTRUCTION 2.72%
11 State Bank Of India FINANCIAL SERVICES 2.58%
12 AXIS Bank Ltd. FINANCIAL SERVICES 2.43%
13 Bharti Airtel Ltd. TELECOM 2.39%
14 Bajaj Finance Ltd. FINANCIAL SERVICES 2.08%
15 Asian Paints CONSUMER DURABLES 1.76%
16 Maruti Suzuki India Ltd. AUTOMOBILE & AUTO COMPONENTS 1.63%
17 Mahindra & Mahindra Ltd. AUTOMOBILE & AUTO COMPONENTS 1.51%
18 HCL Technologies Ltd. IT 1.49%
19 Sun Pharmaceutical Industries Ltd. HEALTHCARE 1.30%
20 Titan CONSUMER DURABLES 1.17%
21 Tata Motors Ltd. AUTOMOBILE & AUTO COMPONENTS 1.07%
22 Power Grid Corporation of India Ltd. POWER 1.05%
23 Tata Steel Ltd. METALS & MINING 1.01%
24 NTPC Ltd. POWER 0.98%
25 Bajaj Finserv Ltd. FINANCIAL SERVICES 0.96%
26 UltraTech Cement Ltd. CONSTRUCTION MATERIALS 0.94%
27 Tech Mahindra Ltd. IT 0.91%
28 Nestle India Ltd. FMCG 0.90%
29 Wipro Ltd. IT 0.89%
30 Oil And Natural Gas Corporation Ltd. OIL & GAS 0.85%
31 JSW Steel Ltd. METALS & MINING 0.79%
32 Dr. Reddy’s Laboratories Ltd. HEALTHCARE 0.77%
33 IndusInd Bank Ltd. FINANCIAL SERVICES 0.75%
34 HDFC Life Insurance Co. FINANCIAL SERVICES 0.74%
35 Grasim Industries Ltd. CONSTRUCTION MATERIALS 0.72%
36 Cipla Ltd. HEALTHCARE 0.72%
37 Hindalco Industries Ltd. METALS & MINING 0.71%
38 Adani Port and Special Economic Zone Ltd. SERVICES 0.70%
39 SBI Life Insurance Co. FINANCIAL SERVICES 0.70%
40 Bajaj Auto Ltd. AUTOMOBILE & AUTO COMPONENTS 0.70%
41 Divi’s Laboratories Ltd. HEALTHCARE 0.67%
42 Tata Consumer Products Ltd. FMCG 0.61%
43 Britannia Industries Ltd. FMCG 0.59%
44 Coal India Ltd OIL & GAS 0.56%
45 Eicher Motors Ltd. AUTOMOBILE & AUTO COMPONENTS 0.56%
46 Appolo Hospital HEALTHCARE 0.54%
47 Hero MotoCorp Ltd. AUTOMOBILE & AUTO COMPONENTS 0.51%
48 UPL Ltd. CHEMICALS 0.49%
49 Bharat Petroleum Corp. Ltd. OIL & GAS 0.43%
50 Shree Cement Ltd. CONSTRUCTION MATERIALS 0.37%

Quick Note: If you want to research more about the fundamentals of these companies, you can go our Stock research and analysis PORTAL here.

Nifty and Sensex Movements Meaning

Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty goes up, it means that most of the stocks in India went up during the given period.  With respect to NIFTY and NSE, we can say that:

  1. If the Nifty goes up, this means that the stock price of most of the major stocks on the NSE has gone up.
  2. On the other hand, if nifty goes down, this tells you that the stock price of most of the major stocks on NSE has gone down.

The same is true in the case of Sensex. Moreover, when Sensex/Nifty goes high, it shows the economic growth of the country. Else if it keeps declining, it might mean a slow-down or depression.

For example, during the Indian recession of 2008-09, the Sensex fell over 12000 points (-60%). The fall in the Sensex was analogous to the recession. Meaning, that people were selling their shares, and an economic crisis in the country.

Similarly, during the covid19 pandemic, the market crashed by over 33% within a month, which was again in relation to the deteriorating economic scenario in India and the world.

sensex chart last 25 years economic crisis and pandemic 

Also read:

Importance of Market Index

  1. The market indexes are the barometer for market behavior. It gives a general idea of whether most of the stocks have gone up or gone down.
  2. Often, Market Index is used as a benchmark portfolio performance.
  3. It is used as a reflector of investors’ sentiments.
  4. Market indexes are used for the sorting and comparison of various companies.
  5. Indices act as an underlying for Index Funds, Index Futures, and Options.
  6. They are used in passive fund management by Index funds.
  7. The index can give a comparison of returns on investments in stock markets as opposed to asset classes such as gold or debt.

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That’s all. I hope this post ‘What is Nifty and Sensex?” is helpful to the readers. Please comment below if you have any doubts. Have a great day and Happy Investing!

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