CONCEPT – SENSEX

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 CONCEPT – SENSEX

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• What is Sensex: Sensex, in simple words, is the combined value of stocks of 30 specific companies listed on Bombay stock exchange (BSE). BSE can revise this list of 30 over the time. So, if Sensex fluctuates, it shows on the economy as well. For example, if Sensex goes up people become more intrigued in buying stocks because they believe that economy is going to grow. But, if Sensex goes down, people tend to stop investing in economy.
• Example : It is like trying to determine the ‘intelligence’ of a class of 500+ students across various courses by taking the average marks of Top 30 students. Most of the time, the overall performance of the class can be determined by looking at the average of Top 30 students, but this may not necessarily be so. This does not mean comparing the average is wrong. In fact, it is even better to compare the averages across a period of time, or across classes as it is more helpful rather than looking at the average as a stand-alone factor.
• What is Nifty : NIFTY is abbreviated form for National Fifty.  This is an index on fifty shares listed on the National Stock Exchange of India. It covers 50 stocks from different sectors of the Indian economy. So, this is commonly referred to as NIFTY 50 also. When you buy Nifty future, it means you have invested in 50 company’s shares which, collectively, are representing Nifty Index. It is basically automatic diversification of your investment in 50 stocks.Nifty Index comprises 50 companies which are considered to be the national economy’s movers and shakers. Each of the 50 companies contributes some weightage to the Nifty Index and its fall and rise indicates the condition of our economy.
• Why market indices are important : The rise and fall of an index would reflect the composite performance of all these companies, and in turn it is the representative of the whole market. It is the barometer of the economy. Indices can be constructed to track the performance of stocks, bonds, currencies, volatility, prices amongst many other things.
• Difference between Sensex and Nifty :

1. National Fifty is considered as NIFTY while the Sensitive Index is considered as SENSEX. 
2. Nifty is related to NSE (National Stock Exchange) whereas Sensex is related to BSE (Bombay Stock Exchange). 
3. Nifty is the indicator of top companies heavily traded on NSE while the Sensex is the indicator of top companies heavily traded on BSE.
4. The Sensex is older than Nifty (Sensex was found in 1986 whereas Nifty was found in 1995).
5. The major difference between Nifty and Sensex is that 50 companies are indexed in Nifty while 30 companies are indexed in Sensex.

• Similarities between Sensex and Nifty :

1. Both Sensex and Nifty are calculated on the basis of weighted average market capitalization.
2. Covers major companies in various sectors of Indian economy.
3. Both Sensex and Nifty are Indices.
4. Both are related to a Stock Exchange.
5. Both are situated in Mumbai.

• Both, Sensex and Nifty are stock exchange indices that determines the performance of the stock market. In simple words, they are the clear indicators of the market movement. Hence, you get a clear idea whether most of the major stocks have gone up or down. Therefore, when Nifty and Sensex goes up, you see an instant cheerful wave in the stock market. You see a quick motion and excitement in stock trading activities, right!  Moreover, increase in the market index directs towards the economic growth of the country.
• Since, Nifty is more diversified and has additional stocks listed as compared to BSE Sensex, more trading is done on it. However, each of them targets the large-capitalization stocks and performances over the years have clad to be similar.

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