Sensex and Nifty are the two important index which is used to track the movement and behaviour of the Indian stock market. We know that there are more than five thousand companies listed in the Indian stock exchange, hence it’s really hard to track every single stock to evaluate the market performance.
Therefore, a smaller sample is taken from the entire list of stocks based on some criteria, to represent the whole market. This smaller sample is known as Index.
Major differences between Sensex and Nifty
1. Nifty or Nifty 50 is the index for companies listed on NSE while the Sensex or BSE 30 is the index for companies listed on BSE. These companies (financially sound and well established) are selected from the various sectors of the Indian economy.
2. 50 companies are selected to form Nifty (NIFTY50) whereas 30 companies are selected to form Sensex (BSE 30)
Interpreting / Understanding index movements
Dr. Alexander Elder, a famous professional trader and a guide of traders, had said
“The goal of a successful trader is to make the best trades. Money is secondary.”
Yes! Stock trading can be considered as a chess game. If you make the right move at the right time, you can win the game. And, it is not easy for us to track every single stock as there will be several listed companies. So, a market index plays a crucial role here.
• If the Sensex goes down, it shows that the stock price of most of the major stocks on the BSE has gone down. Whereas if the Sensex goes up, it shows that most of the major stocks in BSE went up.
• If Nifty goes up, it shows that the stock price of most of the major stocks on NSE has gone up. Whereas, if Nifty goes down, this shows you that the stock price of the major stocks on NSE has gone down.
Hence, it can be summarized that an increase in the market index directs towards the economic growth of the country. The decrease (downward movement) means economic depression.
So, by watching the movement of these indices, you get a clear idea of whether most of the major stocks have gone up or down. In this way, trading becomes easier.
