What are Sensex and Nifty ?

 

Welcome

This blog is about what is Sensex and Nifty. How Sensex and Nifty are work and basic information about its. How Sensex and Nifty effect on Stock Market.

Sensex

Sensex is one of the oldest stock index in India. It was complied by January 1^st , 1986. The Sensex was coined by stock market analyst Deepak Mohoni. The Sensex has been on growth curve since India opened up its Economy in 1991 and most growth occurred in 21^st century.

Sensex is the stock market index of the Bombay Stock Exchange (BSE). The Sensex is represents the Top 30 companies performance and financial activities.

BSE index based on Five Criteria :

  1] It should be listed in BSE.

  2] It should be a large to mega company.

  3] The stock should be relatively liquid.

  4] The company should generate revenue from core activities.

  5] It should keep the sector balanced broadly in line of Indian equity        

      market.

 

How to calculate Sensex ?

Sensex is calculated using the free float market capitalization method. When Sensex was compiled at 1986 that time calculation based on a market capitalization weighted methodolody . Since September 2003, the Sensex has been calculated based on free float capitalization method.

 

For the calculation to find free float capitalization of a company first find market cap which is number of outstanding shares multiplied by share price and then multiply its free float factor. The free float factor id determined by percentage of floated shares.

 

Nifty

Nifty is a market index introduced by the National Stock Exchange (NSE). The Nifty index was launched on April 22^nd , 1996. Nifty has shaped up to be the largest single financial product in India.

Nifty follows the trends and patterns of blue chip companies , i.e Most liquid and largest Indian securities. Nifty contains host of indices like NIFTY 50 , NIFTY IT , NIFTY Bank , NIFTY Next 50.

Nifty stocks covered across 12 sectors of the Indian Economy which include :

       Information Technology

       Financial Services

       Consumer Goods

       Entertainment and Media

       Metals

       Pharmaceuticals

       Telecommunication

       Cement and its product

       Automobile

       Pesticides and Fertilizers

       Energy and other services.

 

The eligibility criteria for getting listed on the NIFTY Index :

  1] The company must be a domicile of India and registered with the       

      National Stock Exchange.

  2] Stocks must possess high liquidity, which is measured by their average impact cost. It is the cost of security transaction execution in      relation to the index weight as reckoned through market capitalization . It should be 0.50% or lower than that for a period of 6 months while 90% of the observations are made on a portfolio of Rs. 10 Crore.

  3] The company should have a trading frequency of 100% during the previous six months.

  4] It should have an average free-floating market capitalization , which is 1.5 times higher than the smallest constituent in the index.

  5] Shares which have Differential Voting Rights or DVR are also eligible for the index.