What is Sensex and Nifty? Completely Explained

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India’s leading stock exchange programs are Sensex and Nifty. More than 5000 companies sell and buy shares on a daily basis on these platforms. A few companies deal on both the platforms simultaneously. India currently has more than a hundred online trading apps suitable for beginner trading as well as advance trading.

Trading involves a lot of market study, current GDP, an estimate of the day’s market functioning, India’s economy and a few more niches. Trading is no less than running a business people can earn a living out of the profession. It is a viable and trustable career for many.

Stock markets reflect the economy of the country. If the country’s economy is sluggish due to some reasons, the market will work accordingly.

Read Also: What are Shares? Why are they Issued?

What is Nifty?

A stock exchange market introduced on 21st April 1996. The name is an amalgamated term of National (Stock Exchange) and Fifty (50) hence, coined as Nifty after a few days of launch. The key people for the inauguration of NSE were Vikram Limaye (Managing Director) and Girish Chandra Chaturvedi (Chairman). Today, Vikram Limaye heads the market as the MD and CEO making NSE the 11th largest stock exchange market of the world.

Nifty is the stock market index for NSE and has more than 1600 listed companies. Moreover, it is the youngest stock exchange market in India.

Sectors Serviced By Nifty are:

  • Metals
  • IT Software
  • Healthcare (Pharmaceuticals)
  • Tourism and Hospitality
  • Financial services
  • Media and entertainment
  • Automobile industry
  • Gas Petroleum
  • Consumer Goods
  • Energy Sector
  • Shipping
  • Defence

And a few more sectors.

According to the World Federation of Exchanges (WFE), Nifty ranks third in the most number of trades according to statistics released in January 2020.

Nifty comprises and represents 50 companies as thousands of firms are listed on NSE and it becomes difficult to study the stock of each company. Hence, these companies represent the sector’s trading status and people trade accordingly in the market.

What is Sensex?

The name Sensex is derived from a combination of sensitive and index, coined by Deepak Mohini a stock market analyst. Bombay Stock Exchange (BSE) was established in 1875 and is Asia’s first-ever stock exchange market. BSE is currently head by Aashishkumar Chauhan as the MD and CEO. The world’s fastest trade exchange take place on BSE in less than 6 milliseconds. Sensex is the stock market index for BSE with more than 5000 listed companies. BSE is India’s first trading exchange to offer stocks from all sectors.

BSE represents a total of 30 companies, as an index for the Sensex. Companies listed in the Sensex are:

  • State Bank of India
  • Infosys Ltd
  • Kotak Mahindra Bank Ltd
  • Tata Steel Ltd
  • Nestle India Ltd
  • Hindustan Lever Ltd
  • Asian Paints Ltd
  • Maruti Suzuki Ltd

And a few more companies.

What is an Index?

Since BSE and NSE incorporate few thousands of companies. It is burdensome to study the stock price of each stock and evaluate the market’s performance. Hence, a group is made consisting of few companies representing a certain sector. Such a group is called an index.

Companies are shortlisted fro index according to free-float market cap.

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Difference between Sensex and Nifty

There are no major differences in Sensex and Nifty, both are stock exchange markets of India. However, Sensex has an index of 30 companies whereas Nifty deals with an index of 50 companies. Nifty witnesses more trade and deals than Sensex on a daily basis.

What is the role of BSE and NSE?

BSE and NSE provide a common platform for companies, investors and traders to buy and sell shares or stocks of companies. People earn commission through inter-selling of stocks and companies earn investment when people buy their shares. Hence, BSE and NSE have played a major role in manifesting the Indian economy for the past century.