WHAT IS SENSEX AND NIFTY? HOW IT IS CALCULATED?

500 Per Crore / Oct 16, 2021

If you're eager to explore the stock market, then you should be aware of the terms SENSEX and NIFTY. You would have heard it a lot in the financial news as the stock exchanges are completely dependent on its performance. SENSEX and NIFTY are two large cap indexes that are associated to two different stock exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).

In this blog, we'll discuss in detail about what is SENSEX and NIFTY and how can it be calculated.

 

WHAT IS SENSEX?

SENSEX acts as the stock market index indicator for the BSE and it is also referred as BSE Sensex. Established in the year 1986, BSE has market weighed stock index of 30 companies based on their financial performance. In SENSEX, you can explore through various industrial sectors that are large and established in the market.

 

HOW IS SENSEX CALCULATED?

SENSEX is calculated on the basis of free-float method that cam into existence by September 2003. The level of SENSEX indicates the performance of 30 stocks in the market. The free float method considers the proportion of the shares that can be readily traded in the stock market.

The market capitalization is taken into account and it's performed by multiplying all the shares issued by the company with respect to the price of its stock. BSE determines the free float market capitalization base on the details submitted by the company. The ratio and proportion are based on the base index of 100.

 

WHAT IS NIFTY?

The market indicator of NSE is Nifty and presently has 51 stocks listed in the stock exchange. NIFTY is managed by India Index Services and Products Ltd. (IISL) and is also referred as NIFTY 50 or CNX Nifty.

 

HOW IS NIFTY CALCULATED?

The free flat market capitalization method is also used to calculate the NIFTY. NIFTY also follows a mathematical formula that multiplies the equity capital with a price to determine the market capitalization. The equity capital is multiplied by a price which is further multiplied with IWF to determine the number of shares available for trading freely in the market. The Index is determined by considering the current market value divided by base market capital and multiplied by Base Index Value of 1000.

 

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Both SENSEX and NIFTY are stock market index that determines the strength and value of the stock market. When  compared to SENSEX, NIFTY is more diversified as it has more stock listed in it and more trading is performed through it. However, the performance of both markets have tend to be similar and both targets large-cap stocks.

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