Difference between Nifty and Sensex

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are India’s two principal stock exchanges 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 enough to tell how the market moves. There are two stock indices in India. To understand the specifics of these two indices and their differences, 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 in the index usually span across multiple economic sectors and industries. 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 investing in companies, you can invest in stock indexes through various mutual fund schemes.

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.

Parameter	Sensex	Nifty
Definition	The Sensex is the benchmark index of the Bombay Stock Exchange.	The Nifty is the benchmark index of the National Stock Exchange.
Introduction Year	Being introduced in 1986, it is the oldest stock index in India.	Introduced in 1996, the Nifty is a relatively newer stock index.
Name Origin	Sensex is an amalgamation of the words ‘sensitive’ and ‘index.’	Nifty is an amalgamation of the words ‘national’ and ‘fifty.’
Number of Companies	The index comprises the top 30 listed companies on the BSE.	The index comprises the top 50 listed companies in the NSE.
Sectors Covered	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.
Base Value	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.
Base Year	The base year considered for the Sensex calculation is 1978-1979.	The base year that’s considered for the calculation of Nifty is 1995.

Factors That Affect the Performance of an Index

Nifty, Sensex, and other related stock market indices are controlled by a massive range of factors, including macroeconomic and market dynamics, determining their performance.

Economic Indicators

All the significant economic indicators have their effects on investor psychology. A few of these are: gross domestic product growth rate represents the overall health of an economy; higher growth results in improved corporate earnings and more promising stock prices. When inflation rises, purchasing power erosion usually precedes tighter monetary policies; the market performance usually depreciates.

Interest Rates

Interest rates also contribute to the Nifty vs Sensex equation. An increase in interest rates made by central banks pushes up the cost of borrowing for corporates, leading to a squeeze on their profit margins and, consequently lowering the equity valuations. In contrast, lower interest rates generally tend to be a boon for consumer investments and expenditures, thus bolstering index returns.

Global Influences

Global events also play a significant role for Nifty and Sensex. Economic downturns in significant economies or geopolitical tensions can cause market volatility. For instance, crises like the one induced by COVID-19 have seen large-scale sell-offs and uncertainty in global markets.

Finally, market sentiment due to news, trends, and the psychology of investors makes the value of the Nifty and Sensex indexes rocket up and down at a breakneck speed. Positive news can trigger a buying spree, while negative news can lead to panic selling. Hence, these must also be understood well to understand how the index would move.

Companies Listed on Nifty & Sensex

Here is a list of the Nifty 50 companies –

S.No	Company Name	Sector
1	Adani Enterprises Ltd	Conglomerate
2	Adani Ports & SEZ	Ports & Logistics
3	Apollo Hospitals Enterprise Ltd	Healthcare
4	Asian Paints Ltd	Paints & Chemicals
5	Axis Bank Ltd	Banking
6	Bajaj Auto Ltd	Automobile
7	Bajaj Finance Ltd	Financial Services
8	Bajaj Finserv Ltd	Financial Services
9	Bharti Airtel Ltd	Telecommunications
10	BPCL (Bharat Petroleum Corp. Ltd)	Oil & Gas
11	Britannia Industries Ltd	FMCG
12	Cipla Ltd	Pharmaceuticals
13	Coal India Ltd	Mining
14	Divi’s Laboratories Ltd	Pharmaceuticals
15	Dr. Reddy’s Laboratories Ltd	Pharmaceuticals
16	Eicher Motors Ltd	Automobile
17	Grasim Industries Ltd	Cement & Construction
18	HCL Technologies Ltd	Information Technology
19	HDFC Bank Ltd	Banking
20	HDFC Life Insurance Company Ltd	Insurance
21	Hero MotoCorp Ltd	Automobile
22	Hindalco Industries Ltd	Metals
23	Hindustan Unilever Ltd	FMCG
24	ICICI Bank Ltd	Banking
25	Indian Oil Corporation Ltd	Oil & Gas
26	IndusInd Bank Ltd	Banking
27	Infosys Ltd	Information Technology
28	ITC Ltd	FMCG
29	JSW Steel Ltd	Metals
30	Kotak Mahindra Bank Ltd	Banking
31	Larsen & Toubro Ltd	Construction
32	Mahindra & Mahindra Ltd	Automobile
33	Maruti Suzuki India Ltd	Automobile
34	Nestlé India Ltd	FMCG
35	NTPC Ltd	Power
36	Oil and Natural Gas Corporation Ltd	Oil & Gas
37	Power Grid Corporation of India Ltd	Power
38	Reliance Industries Ltd	Conglomerate
39	SBI Life Insurance Company Ltd	Insurance
40	State Bank of India	Banking
41	Sun Pharmaceutical Industries Ltd	Pharmaceuticals
42	Tata Consumer Products Ltd	FMCG
43	Tata Consultancy Services Ltd	Information Technology
44	Tata Motors Ltd	Automobile
45	Tata Steel Ltd	Metals
46	Tech Mahindra Ltd	Information Technology
47	Titan Company Ltd	Consumer Durables
48	UltraTech Cement Ltd	Cement
49	UPL Ltd	Chemicals & Fertilizers
50	Wipro Ltd	Information Technology

 

Here is a list of the Sensex 30 companies –

S.No	Company Name	Sector
1	Asian Paints Ltd	Paints & Chemicals
2	Axis Bank Ltd	Banking
3	Bajaj Finance Ltd	Financial Services
4	Bajaj Finserv Ltd	Financial Services
5	Bharti Airtel Ltd	Telecommunications
6	Dr. Reddy’s Laboratories Ltd	Pharmaceuticals
7	HCL Technologies Ltd	Information Technology
8	HDFC Bank Ltd	Banking
9	HDFC Ltd (Housing Development Finance Corporation)	Financial Services
10	Hindustan Unilever Ltd	FMCG
11	ICICI Bank Ltd	Banking
12	IndusInd Bank Ltd	Banking
13	Infosys Ltd	Information Technology
14	ITC Ltd	FMCG
15	Kotak Mahindra Bank Ltd	Banking
16	Larsen & Toubro Ltd	Construction
17	Mahindra & Mahindra Ltd	Automobile
18	Maruti Suzuki India Ltd	Automobile
19	Nestlé India Ltd	FMCG
20	NTPC Ltd	Power
21	Power Grid Corporation of India Ltd	Power
22	Reliance Industries Ltd	Conglomerate
23	State Bank of India	Banking
24	Sun Pharmaceutical Industries Ltd	Pharmaceuticals
25	Tata Consultancy Services Ltd	Information Technology
26	Tata Motors Ltd	Automobile
27	Tata Steel Ltd	Metals
28	Tech Mahindra Ltd	Information Technology
29	UltraTech Cement Ltd	Cement
30	Wipro Ltd	Information Technology

Which is Better? Nifty or Sensex?

While comparing Nifty and Sensex, most investors debate which index best suits their investment strategy.

Composition and Coverage

Nifty holds 50 stocks from the NSE, while Sensex comprises 30 stocks from the BSE. This makes the representation of the Indian equity market more comprehensive in Nifty, which covers nearly 65% of the total market capitalization of the companies listed. Sensex includes about 45%, less diversified but highly concentrated on some established companies.

Performance Over Time

Both indices have performed well in the past. In recent years, Nifty has often outperformed Sensex with a higher CAGR. This Nifty vs Sensex aspect may appeal to those seeking growth potential from a wider range of companies.

Investment Strategy

The Nifty also provides investors with exposure to several sectors and companies, and the option could be chosen as an alternative to Sensex for large-capitalized stocks in the market with stable earnings. A good reason to choose the Nifty in the Nifty vs Sensex debate is the liquidity factor that might prove a more active investment strategy for traders.

Nifty vs Sensex winner depends on individual investment objectives, risk tolerance, and expectations from the market. More or less, both indices are good benchmarking tools in terms of the performance of the Indian equity market.

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. Open a demat account to invest seamlessly in the stock markets and kickstart the capital appreciation process. Access to a stock market app can also enhance your investment experience, offering tools and convenience to manage your portfolio effectively.

Frequently Asked Questions

How do Nifty and Sensex work?

Nifty and Sensex are benchmark indices that measure the performance of major companies on their respective exchanges. Nifty tracks 50 stocks from the National Stock Exchange, whereas Sensex tracks 30 stocks from the Bombay Stock Exchange. They calculate index values using the free-float market capitalization method, depicting the overall market trend and investor sentiment.

Is Sensex better than Nifty?

The Nifty vs Sensex winner depends on the situation. Sensex is usually seen as a stable index since it contains only 30 stocks of well-established companies. But the Nifty, with its 50 stocks gives much more diversification. Therefore, performance-wise, these two indices differ under various market conditions.

Which is older, the Sensex or the Nifty?

One difference between Nifty and Sensex is that Nifty is relatively younger than Sensex. The first stock market index of India was set in 1986 with the launch of Sensex. However, the latter was launched in the year 1996. 

What exactly is the Sensex Nifty BSE NSE?

A few major indices representing the Indian stock market are Nifty and Sensex. The Sensex tracks 30 major companies within the Bombay Stock Exchange and is, therefore, a stock index of that particular exchange. In contrast, Nifty represents the National Stock Exchange and has 50 leading companies. The benchmark index is one of the parameters to judge performance in terms of the market.

Why is Sensex more than Nifty?

Sensex would look somewhat higher than Nifty not merely because of their base value-100 for Sensex and 1000 for Nifty but also because Sensex consists of a smaller number of relatively larger-cap companies with higher index values in a bullish market scenario. Relative performance between Nifty and Sensex, at any point in time, would also depend on market dynamics.