The market index is used to predict the direction of the market. The top stock exchanges have indices that reflect investor sentiment or market behavior. The indices are used by general investors to get an indication of the market's direction. Indices can indicate either a bullish or a bearish trend by moving up or down.
Nifty and Sensex, important stock indices in India, are used to determine or show the strength of the stock markets. Sensex, which is an index of equity, includes shares from top 30 companies on the Bombay Stock Exchange. This represents approximately 45 percent the index's free-float capitalization. Nifty, on the other side, includes shares from 50 of the most prominent companies on the National Stock Exchange. This makes up approximately 62 percent the index's freefloat market capitalization.
The index is a statistical aggregate that measures changes such as price movements or market performance. Market indices are based on market characteristics and calculate or measure the portfolio's value. Investors use market indices for comparison and to manage their investment portfolios.
Two large-cap indices are available in India's stock market: the S&P BSE Sensex and the S&P CNX Nifty. The market's performance can be measured using both indices.
Sensex, also known as the Sensitive Indice, is the Bombay Stock Exchange's stock market index. Sensex, which has a base of 100, is the market-weighted index that includes shares from top 30 companies based on financial soundness and performance. Sensex is also calculated using the free-float capitalization method. The index's level directly reflects the performance of the selected stocks.
Free-float market capitalization refers to the proportion of all shares issued by companies that is readily available for trading on the market. The index reflects the market value of the selected stocks relative to a baseline period. Sensex is calculated first by determining the market capitalization for each company and then multiplying that number to the freefloat factor. This gives the free-float market capitalization. The Index Divisor divides it.
The stock market index for the National Stock Exchange Fifty is Nifty. It is also known as NIFTY 50 and CNX Nifty. It consists of 50 stocks that are active traded on NSE and is managed and owned by India Index Services and Products Ltd., a subsidiary NSE. The index's base value is 1000 and is calculated using the free-float market capitalization weighted methodology.
Similar to Sensex's market capitalization, it is calculated first by multiplying equity and market price. The equity capital is then multiplied by price to determine free-float capitalization. It is then multiplied again with the IWF, or the Investible Weight Factor. The daily Nifty calculation is done by multiplying the current market value and the base market capital by 1000.
Nifty and Sensex are stock market indices that are used to measure the strength of the stock markets. Although they are both calculated using the same methodology, there are some differences.
01. Nifty is derived primarily from 'National Fifty,' Sensex comes from 'Sensitive Indice'.
02. Sensex is managed by Bombay Stock Exchange, (BSE), and Nifty by India Index Services Products Ltd., a subsidiary of National Stock Exchange.
03. Nifty is made up of 50 stocks selected from the 50 largest companies. These stocks are used in determining the index. Sensex consists 30 stocks selected from the top 30 companies.
04. Nifty's base index value is 1000 and Sensex's base index value is 100.
The economy changes are a sensitive topic for Nifty and Sensex. The stock market will perform better when the economy is growing. In turn, the indices will rise. The performance of the indices is affected by several macroeconomic factors.
Rate of interest change: Stock market and interest rate move in opposite directions. Lending becomes more expensive when the economy's interest rate rises. Companies reduce their expenses to compensate, which puts pressure on stock performance. Inflations suffer as a result.
Inflation A situation in which the value of money falls rapidly.
Inflation is a problem for investors as they have less money to invest. Companies also suffer from rising costs in the economy. This causes the stock market fall.
Global economy. Political ups and downs as well as global economic fluctuations are responsible for the fluctuating Sensex or Nitfy. Recessions in the global markets will have an impact on the performance of Indian indexes.
Nifty and Sensex, two of India's major stock market indices, are both Nifty. Nifty and Sensex both measure the strength of the stock exchange and share many similarities. The key difference between Sensex & Nifty is that Nifty measures the performance 50 of the top companies while Sensex measures the performance 30 of the most established companies. Nifty's base index value is 1000. Sensex has a base value of 100.