Nifty vs Sensex: How The Two Stock Market Indices Differ From Each Other

Nifty and Sensex are both key stock market indices in India, reflecting the performance of the country's stock market. But how different are the two from each other??

Read on as we help you understand the main differences between Nifty and Sensex:

Differences Between Sensex & Nifty

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Composition of Indices:

Nifty: The Nifty, officially known as the Nifty 50, is comprised of the 50 largest and most liquid stocks listed on the National Stock Exchange of India (NSE). It represents various sectors of the Indian economy.

Sensex: The Sensex, or the S&P BSE Sensex, is composed of 30 large, well-established companies from various sectors listed on the Bombay Stock Exchange (BSE). It is one of the oldest and most widely tracked stock market indices in India.

Number of Stocks:

Nifty: Tracks 50 stocks.

Sensex: Tracks 30 stocks.

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Methodology:

Nifty: It follows the free-float market capitalization weighted methodology. Free-float market capitalization takes into account only the shares that are available for trading in the market.

Sensex: It uses the market capitalization-weighted methodology. Market capitalization is the total market value of the outstanding shares of a company.

Stock Exchange:

Nifty: It is traded on the NSE (National Stock Exchange).

Sensex: It is traded on the BSE (Bombay Stock Exchange).

Calculation Base:

Nifty: The Nifty is computed using the free-float market capitalization method, where the level of the index reflects the total market value of all the stocks in the index relative to a particular base period.

Sensex: The Sensex is calculated using the market capitalization-weighted method, where the level of the index reflects the total market value of all the stocks in the index relative to a particular base period.

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Sector Representation:

Nifty: Represents a broader spectrum of the market with 50 stocks from various sectors.

Sensex: Represents 30 well-established companies across sectors.

Popularity and Recognition:

Nifty: While both indices are widely followed, the Nifty is often considered more representative of the broader market due to its larger number of stocks.

Sensex: It is one of the oldest and most iconic indices and is often used as a benchmark for the Indian stock market.

In summary, both Nifty and Sensex serve as important indicators of the Indian stock market's performance, but they differ in terms of the number of stocks, methodology, and sectors represented. Investors often use these indices to gauge the overall health and trends in the stock market.

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