Introduction

Investors study a stock market index to understand the general market direction. Indices are a prominent concept of the leading stock market exchanges worldwide and indicate investor sentiment or market behaviour. You can decipher if there is a bullish or bearish sentiment by looking at the indices’ upward or downward movement.

India has two popular stock market indices, namely Sensex and Nifty. These indices serve as the benchmark to compare the performance of other indices and stocks. While the two have plenty of similarities, differences also exist that you must understand. Before learning Sensex vs Nifty differences, you must know what an index is and what Sensex and Nifty are.

What is an Index?

India’s principal stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). They have thousands of companies listed, with millions of trades executed daily. Determining the market trend by tracking the performance of each listed stock is nearly impossible. Thus, the concept of stock market indexes was introduced to solve this problem.

An index studies a set of listed companies from specific industries as a representative. It is like picking a few apples from a basket to determine if the apples a store sells are good quality. The set of listed companies is called the index, and the selected companies are known as the index constituents.

An Index comprises stocks from all major sectors and not a specific industry. As a result, when you look at the index value, you have the stock market’s overall picture instead of a specific sector.

What is Sensex?

Sensex is BSE’s stock market index. It is also written as S&P BSE Sensex. It comprises 30 performing, promising, and luring companies in the market. The criteria for selecting these companies include market capitalisation, trading frequency, industry representation, high liquidity, and average daily turnover.

What is Nifty?

Nifty is NSE’s stock market index. It is also written as Nifty 50. Owned and managed by India Index Services and Products Ltd. (IISL), a subsidiary of NSE, it picks the most actively traded 50 stocks. The criteria for selection include float adjustment, liquidity, and domicile.

Sensex vs Nifty - What are the differences?

Here’s a brief comparison between Sensex and Nifty.

The meaning of the terms base number, base year, and base capital are as follows:

• Base number: The market index’s value is calculated considering this basic number. It is favourable when the difference between the base number of the market index’s current value is large.
• Base year: The values of other years are compared with reference to this year. Sensex and Nifty have undergone significant growth since their inception.
• Base capital: The market index value is estimated by relating this market value to the current market value. It applies to Nifty only.

Conclusion

The debate over Sensex vs Nifty - which is better is common. The two are prominent Indian market indices. Sensex benchmarks the BSE, while the Nifty is NSE’s popular index. Investors track the Sensex and Nifty to make wise investment decisions. Their performance lets you make profits and diversify your portfolios. If you are new to the stock market, you can invest in BSE and Sensex companies, whereas if you are interested in derivatives futures and options trading, you can go for NSE and Nifty stocks.

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