Difference between Nifty and Sensex
The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are the two principal stock exchanges in India that are currently active. Both exchanges are entirely electronic, with a combined total of over 7,000 firms. Millions of trades take place on both of these exchanges every trading day. Because these are electronic exchanges, you'll need a demat account to participate in the trading process.
With such a large number of companies listed on these exchanges, it is nearly impossible to keep track of the movement of the stock market. As a result, the stock exchanges devised the notion of indexes to make the procedure easier. A single glance at these indices is more than enough to tell which way the market is moving.
There are two stock indices in India. To understand the specifics of these two indices and the differences between them, let’s understand the concept of an index.
What is a stock index?
Technically, a stock index is a carefully curated list of companies listed on an exchange. The companies that feature in the index usually span across multiple sectors and industries in the economy. Furthermore, the companies in a stock index are generally well-established and represent their industry or sector.
Since an index has companies from almost all the major sectors and industries, it is widely regarded as one of the best indicators of the performance of an economy. In addition to being able to invest in companies, you can also invest in stock indexes through various mutual fund schemes.
Let’s move on to the two major indices of the country - Sensex and Nifty.
What is Sensex?
The term Sensex is derived from the combination of the words sensitive and index and was coined by Deepak Mohoni, a financial journalist. The Sensex is the benchmark index of the Bombay Stock Exchange (BSE). Traders also refer to the Sensex as the S&P BSE Sensex. Introduced in 1986, the Sensex is India’s oldest stock index and comprises the top 30 listed companies in the BSE across a wide-range of sectors and industries.
What is Nifty?
Also known as the National Stock Exchange Fifty, the Nifty is the benchmark index of the National Stock Exchange (NSE). The index was introduced in 1996 and is also referred to as CNX Nifty and Nifty 50 by traders. The Nifty comprises the top 50 companies across various sectors and industries that are listed in the NSE. The index represents large-cap companies, which generally have a good degree of liquidity and are traded in stock exchanges. These companies represent approximately 70% - 75% of total market capitalization in India.
What are the differences between Nifty and Sensex?
Let’s delve a little deeper into these two indices and get to know the differences between them.
| Sensex | Nifty |
|---|---|
| The Sensex is the benchmark index of the Bombay Stock Exchange. | The Nifty is the benchmark index of the National Stock Exchange. |
| Being introduced in 1986, it is the oldest stock index in India | Introduced in the year 1996, the Nifty is a relatively newer stock index. |
| Sensex is an amalgamation of the words ‘sensitive’ and ‘index’. | Nifty is an amalgamation of the words ‘national’ and ‘fifty’. |
| The index comprises the top 30 listed companies in the BSE. | The index comprises the top 30 listed companies in the BSE. |
| The stock index features companies across as many as 13 different sectors. | The Nifty, on the other hand, is broader and features companies across 24 different sectors. |
| The base value that’s utilized for the calculation of the index is 100. | The base value that’s utilized for the calculation of the index is 1000. |
| The base year that’s considered for the calculation of Sensex is 1978-1979. | The base year that’s considered for the calculation of Nifty is 1995. |
Conclusion
Some well-established and fundamentally stable companies feature in both the Nifty and the Sensex. On a related note, as an investor, investing in either one of these indices allows you to be a part of the wealth creation process. Make sure that you have a free demat account to invest seamlessly in the stock markets and kickstart the capital appreciation process.