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

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

A complete guide on what is Nifty and Sensex: Have you ever heard of the name of Dalal street or the D-Street on any market news channel or financial magazine?

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. The BSE is the world’s 10th largest stock exchange with an overall market capitalization of $2.29 Trillion as of April 2018.
  5. More than 5500 companies are publicly listed on the BSE.

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 Bombay Stock Exchange (BSE).

  1. The 30 companies are selected on the basis of the 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 41,700 today. If Sensex drops to 41,450 tomorrow, it means that the majority of the 30 companies’ financial condition is not good i.e. their share price is falling. 

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what is sensex - chart dec 19

— List of 30 companies consisting of Sensex as of Dec’2019

Scrip CodeCOMPANYLast Close PriceIndustry
500820Asian Paints Ltd1802CONSUMER GOODS
532215Axis Bank Ltd742.75FINANCIAL SERVICES
532977Bajaj Auto Ltd3219.05AUTOMOBILE
500034Bajaj Finance Ltd4091.1FINANCIAL SERVICES
532454Bharti Airtel Ltd448.5TELECOM
532281HCL Technologies Ltd569.05IT
500180HDFC Bank Ltd1288.45FINANCIAL SERVICES
500182Hero MotoCorp Ltd2361.55AUTOMOBILE
500696Hindustan Unilever Ltd1949.95CONSUMER GOODS
500010Housing Development Finance Corp2412.25FINANCIAL SERVICES
532174ICICI Bank Ltd540FINANCIAL SERVICES
532187IndusInd Bank Ltd1489.95FINANCIAL SERVICES
500209Infosys Ltd731.2IT
500875ITC Ltd244.35CONSUMER GOODS
500247Kotak Mahindra Bank Ltd1729.3FINANCIAL SERVICES
500510Larsen & Toubro Ltd1312.4CONSTRUCTION
500520Mahindra & Mahindra Ltd535.05AUTOMOBILE
532500Maruti Suzuki India Ltd7239.35AUTOMOBILE
532555NTPC Ltd114.05ENERGY
500312Oil & Natural Gas Corp Ltd125.6ENERGY
532898Power Grid Corp of India Ltd186.35ENERGY
500325Reliance Industries Ltd1605.15ENERGY
500112State Bank of India328.15FINANCIAL SERVICES
524715Sun Pharmaceutical Industries Ltd433.55PHARMA
532540Tata Consultancy Services Ltd2228.65IT
500570Tata Motors Ltd179.15AUTOMOBILE
570001Tata Motors Ltd DVR74.65AUTOMOBILE
500470Tata Steel Ltd446.75METALS
532755Tech Mahindra Ltd782.85IT
500295Vedanta Ltd149.35METALS
532648Yes Bank Ltd49.9FINANCIAL SERVICES

(Source: BSE India)

Quick Note: Please notice that ‘Tata Motors Ltd‘ and ‘Tata Motors Ltd DVR‘ are mentioned separately here. That’s why Sensex has presently 31 stocks listed in it. Nevertheless, as the parent company of both these stocks is the same, that’s why Sensex still consists of 30 companies. Do not get confused here!!

2. National Stock Exchange (NSE)

The National Stock Exchange (NSE) is the leading stock exchange of 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 which offered the easy trading facility to the investors spread across the length and breadth of the country.
  3. NSE has a total market capitalization of more than US$ 2.27 trillion, making it the world’s 11th-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.

Also read: How To Invest Rs 10,000 In India for High Returns?

— NIFTY or Nifty 50

Nifty, also called NIFTY 50, is the market index consisting of 50 well-established and financially sound companies listed on 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 the free-float market capitalization.
  4. Here, the 50 top stocks are selected from different 24 sectors.
  5. Nifty is owned and managed by India Index Services and Products (IISL)

Since inception in 1995, Nifty has given a return of 11.13% CAGR (till April 30, 2018).

what is nifty - chart dec 19

Also read: Nifty 50 fact sheet

— List of 50 companies consisting of Nifty as of Dec’2019

Company NameIndustrySymbol
Adani Ports and Special Economic Zone Ltd.SERVICESADANIPORTS
Asian Paints Ltd.CONSUMER GOODSASIANPAINT
Axis Bank Ltd.FINANCIAL SERVICESAXISBANK
Bajaj Auto Ltd.AUTOMOBILEBAJAJ-AUTO
Bajaj Finance Ltd.FINANCIAL SERVICESBAJFINANCE
Bajaj Finserv Ltd.FINANCIAL SERVICESBAJAJFINSV
Bharat Petroleum Corporation Ltd.ENERGYBPCL
Bharti Airtel Ltd.TELECOMBHARTIARTL
Bharti Infratel Ltd.TELECOMINFRATEL
Britannia Industries Ltd.CONSUMER GOODSBRITANNIA
Cipla Ltd.PHARMACIPLA
Coal India Ltd.METALSCOALINDIA
Dr. Reddy's Laboratories Ltd.PHARMADRREDDY
Eicher Motors Ltd.AUTOMOBILEEICHERMOT
GAIL (India) Ltd.ENERGYGAIL
Grasim Industries Ltd.CEMENT & CEMENT PRODUCTSGRASIM
HCL Technologies Ltd.ITHCLTECH
HDFC Bank Ltd.FINANCIAL SERVICESHDFCBANK
Hero MotoCorp Ltd.AUTOMOBILEHEROMOTOCO
Hindalco Industries Ltd.METALSHINDALCO
Hindustan Unilever Ltd.CONSUMER GOODSHINDUNILVR
Housing Development Finance Corporation Ltd.FINANCIAL SERVICESHDFC
ICICI Bank Ltd.FINANCIAL SERVICESICICIBANK
ITC Ltd.CONSUMER GOODSITC
Indian Oil Corporation Ltd.ENERGYIOC
IndusInd Bank Ltd.FINANCIAL SERVICESINDUSINDBK
Infosys Ltd.ITINFY
JSW Steel Ltd.METALSJSWSTEEL
Kotak Mahindra Bank Ltd.FINANCIAL SERVICESKOTAKBANK
Larsen & Toubro Ltd.CONSTRUCTIONLT
Mahindra & Mahindra Ltd.AUTOMOBILEM&M
Maruti Suzuki India Ltd.AUTOMOBILEMARUTI
NTPC Ltd.ENERGYNTPC
Nestle India Ltd.CONSUMER GOODSNESTLEIND
Oil & Natural Gas Corporation Ltd.ENERGYONGC
Power Grid Corporation of India Ltd.ENERGYPOWERGRID
Reliance Industries Ltd.ENERGYRELIANCE
State Bank of IndiaFINANCIAL SERVICESSBIN
Sun Pharmaceutical Industries Ltd.PHARMASUNPHARMA
Tata Consultancy Services Ltd.ITTCS
Tata Motors Ltd.AUTOMOBILETATAMOTORS
Tata Steel Ltd.METALSTATASTEEL
Tech Mahindra Ltd.ITTECHM
Titan Company Ltd.CONSUMER GOODSTITAN
UPL Ltd.FERTILISERS & PESTICIDESUPL
UltraTech Cement Ltd.CEMENT & CEMENT PRODUCTSULTRACEMCO
Vedanta Ltd.METALSVEDL
Wipro Ltd.ITWIPRO
Yes Bank Ltd.FINANCIAL SERVICESYESBANK
Zee Entertainment Enterprises Ltd.MEDIA & ENTERTAINMENTZEEL

(Source: NSE India)

nifty50 constituents april 2020

— Nifty and Sensex Movements Meaning

The Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty go 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:

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  1. If Nifty goes up, this means that the stock price of most of the major stocks on 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, people were selling their shares and an economic crisis in the country.

Sensex last 30 years 

Also read:

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Importance of Market Index

  1. The market indexes are the barometer for market behavior. It gives a general idea about 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 investor’s sentiments.
  4. Market indexes are used for sorting and comparison of the 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.

If you are new to stocks and want to learn from scratch, here is an amazing 7-day eCourse: HOW TO INVEST IN INDIAN SHARE MARKET. Enroll now and start your share market journey today (It’s FREE) #Happy Investing.

That’s all. I hope this post ‘What is nifty and sensex? Stock market basics for beginners’ is helpful to the readers. Please comment below if you have any doubts. Happy Investing!

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