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What is the Nifty, Sensex, NSE and BSE ?

Marketlive.in brings in Stock Market tutorials explaining the definitions of the Sensex and the Nifty indices. The tutorial explains in simple terms what the BSE, NSE stand for and what do the Sensex and Nifty indices signify.

BSE & NSE – What are these ?

What is Sensex ?

What is Nifty ?

What do they show ?

 

BSE & NSE – What are these ?

Stocks / Shares are traded in the stock market called as ‘Stock Exchanges’. These are the places where people would buy and sell stocks/shares.

In India, although there are many such stock exchanges, two large stock exchanges are very popular. The first one is the National Stock Exchange (NSE), which is located in New Delhi. The second is the Bombay Stock Exchange (BSE), which is located in Mumbai.

 

What is Sensex ?

BSE India Logo

In the Bombay Stock Exchange, shares of many companies are traded. These companies belong to different industrial sectors such as Oil & Gas, Banking, IT, Cement and so on.

A list of 30 such companies belonging to various sectors are chosen and they become the constituents of the ‘Sensex’ index. Sensex stands for ‘Sensitive Index’ comprising of 30 stocks from the BSE.

The formula for arriving the value of Sensex is a bit complicated and we are not required to understand the complex formula at this stage. All we have to understand is that the Sensex is based on the price values of these individual 30 stocks.

 

What is Nifty ?

NSE India Logo

Similarly, in the National Stock Exchange, shares of many companies are traded. These companies again belong to different industrial sectors such as Oil & Gas, Banking, IT, Cement and so on.

A list of 50 such companies belonging to various sectors are chosen and they become the constituents of the ‘Nifty’ index.

The formula for arriving the value of Nifty is again a bit complicated and we are not required to understand the complex formula at this stage. All we have to understand is that the Nifty is based on the price values of these individual 50 stocks.

 

What do they show ?

The Sensex and the Nifty are called as the ‘Benchmark Indices’. They represent the overall trend of the market in general.

These indices will give an overall picture of how the market is behaving. A rise in the Sensex value indicates that all or some of the 30 stocks of the Sensex are trading higher. Similarly if the Sensex value is down, it indicates that either all or some of the 30 stocks of the Sensex are trading lower.

Depending on the number of shares traded for each company and the price of these shares, the Market Capitalization (Market Cap) of these companies will vary. The Market Cap plays a significant role in determining the weightage for each company in the Nifty and the Sensex indices.

Thus based on the movement of these individual stocks, the values of the Nifty and Sensex will change, which will indicate the general behaviour of the market.


 

 

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