BASIC GUIDE TO STOCK MARKET INDICES SENSEX AND NIFTY.
                     BASIC GUIDE TO STOCK MARKET INDICES 
SENSEX AND NIFTY
INTRODUCTION
• In India, Nifty and Sensex are important stock indices, which determine or depict the strength 
of the stock market. 
– For equities, Sensex is the oldest market index, and includes shares from the top 30 
companies listed on the Bombay Stock Exchange (BSE).
– Nifty on the other hand includes shares from the top 50 companies listed on the 
National Stock Exchange (NSE).
Source: IndiaInfoline
WHAT IS AN INDEX?
• The statistical aggregate that measures change, such as market performance or price 
movement is the index.
• There are two large cap indices in the Indian stock market, which are the S&P BSE Sensex, 
and the S&P CNX Nifty. 
Source: YouTube
WHAT IS SENSEX?
• Sensex is the stock market index of the Bombay Stock Exchange (BSE). With a base value of 
100, Sensex is the market-weighted stock index which includes shares from the top, well-
established 30 companies.
• Furthermore, Sensex is calculated by using the free-float market capitalization method, and 
the performance of the 30 selected stocks is directly reflected by the level of the index.
Source: Niveshak
WHAT IS NIFTY?
• The National Stock Exchange Fifty (Nifty) is the stock market index of the National Stock 
Exchange (NSE). 
• The base value of the index is 1000, and it is computed using the free-float market 
capitalization weighted method.
Source: The Financial Express
STOCK MARKET INDEXES 
• There are stock market indexes of various sectors of the market that don't always move in 
tandem. 
• We need to understand how stock market indexes are created and how they differ in order to 
be able to make sense of the daily movements in the Indian marketplace.
Source: Investopedia
S&P BSE SENSEX (ALSO CALLED BSE 30 OR SENSEX)
• SENSEX (or SENSITIVE INDEX) was created in 1986 and is the oldest stock market index for 
equities. 
• It comprises of shares of 30 well-established and financially sound companies listed on BSE. 
These companies represent various industrial sectors of the Indian economy.
Source: IndiaInfoline
CALCULATION OF SENSEX
• SENSEX has adopted the market capitalization weighted method in which weights are 
assigned according to the size of the company. Larger the size, higher the weightage.
• The total value of market shares at the time of creation of index is assumed to be100 points. 
• This is for the purpose of logically representing the change in terms of %. So, if the market 
capitalization moves up 10%, the index also moves10% to 10.
Source: WealthTrust
S&P CNX NIFTY (ALSO CALLED NIFTY 50 OR NIFTY)
• NIFTY was created in 1996 and comprises of 50 shares listed on the National Stock Exchange. 
• It covers 24 sectors of the Indian economy and offers investors exposure to the Indian market 
in a single portfolio.
Source: NCFM Academy
CALCULATION OF NIFTY
• NIFTY is calculated using the same methodology adopted by the Bombay Stock Exchange in 
calculating the SENSEX. However, there are three basic differences:
– The base year taken is 1995 (SENSEX is 1979)
– The base value is 1000 (SENSEX is 100)
– NIFTY is calculated on 50 active stocks traded in the NSE (SENSEX is calculated on 30)
Source: Stocks4all
IMPORTANCE OF MARKET INDEX
• The market indexes are the barometer for market 
behavior. It gives a general idea about whether 
most of the stocks have gone up or gone down.
• Often, Market Index is used as a benchmark 
portfolio performance.
• It is used as a reflector of investor’s sentiments.
• Market indexes are used for sorting and 
comparison of the various companies.
• Indices act as an underlying for Index Funds, Index 
Futures, and Options.
Source: NividBook