The Sensex has now crossed the 51,000 mark. You might think like this, if you had invested Rs 1 lakh in FD 10 years ago, you would have got around Rs 1.87 lakh. But if you had invested the same amount in the Sensex at that time, you would have made Rs 2.8 lakh today. However, the market has not decreased recently? Yes, he was. Some fall just to strengthen the market (called market correction).
Let’s find out what is ‘Sensex’ according to Chief Executive Officer (CEO) of Phenology Pranjal Kamra and what is its representative called ‘Nifty’? To know this, let us first understand what indexes are.
What is an indicator?
The indicator is a standard format for tracking market performance. It consists of shares of a group involved in a particular group of trades (e.g. BSE or NSE) that replicate a specific area of market activity. Such indices can be either broad-based (like Broad-based) like Sensex and Nifty or they can be more specific like Bank Nifty or BSE Auto Index. In other words, the Sensex presents the market situation of the BSE while the Nifty presents the market situation of the NSE.
Why are they called ‘Sensex’ and ‘Nifty’ and how are they different?
Being a benchmark indicator, both the Sensex and the Nifty are broad-based market dynamics. The Sensex is an acronym for BSE Sensitive Index, while the Nifty is an acronym for NSE Fifty. In addition, there are three main differences between the two indicators:
Number of stocks
The biggest notable difference between the Sensex and the Nifty is the number of shares they hold. The Sensex is a benchmark index consisting of approximately 30 stocks. The Nifty 50, as its name suggests, is an index consisting of a total of 50 stocks.
You have noticed that the needles are referenced according to their points, even when talking about stocks in rupee terms. So, what is this point system? This point system is calculated on the basis of a free-float, market-capital-weighted method. The formula for doing this is:
(Current market value / base market capitalization) x Base index value
The difference is that the Sensex uses the base index value of 100 while the Nifty uses 1000.
Date of formation and base year
The Sensex was launched on January 1, 1986, with a base year of 198–-9. The Nifty was first introduced on April 22, 1996 in a full-market capitalization system. It was changed to free-float system on 26 June 2009. Its base period is 19 November 1999.
In addition to these three issues, it also shows that the Sensex operates from the BSE and the Nifty operates from the NSE.