What are Sensex and Nifty: List of the Best Stocks from each of them

difference between sensex and nifty
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Introduction

The Indian stock market is a gigantic marketplace for more than 1900 companies. Here each investor is looking for one or the other criteria to compare these stocks to identify their best bet. This is when indices like Nifty and Sensex come into play.  

Well, visualize looking at your profile and finding absolutely no comparison points, not being able to identify which stocks have performed the best on the day. Not only will it be a highly tedious process but also be almost impossible to calculate the performance of each of these stocks. Oh, and by the time you manage to do so, the market trends would already have taken a turn. Therefore, it is important to have at least some ready-made solution to it. 

Indices like SENSEX and Nifty evaluate the market strength and reflect investors' confidence. However, an investor must understand how to assess these indices. So, before delving into some critical nuts and bolts of the same, let us savor some of their radical points.

Summary in Brief

  • What is an index?
  • What are Nifty and Sensex?
  • Difference between Nifty and Sensex
  • Calculation of Nifty and Sensex
  • Best stocks from Nifty and Sensex
  • FAQs

What is an Index?

The Indian stock market runs through the best-performing stocks and the statistical tool to identify the performance of these stocks is known to be an Index. These market indices take into consideration a range of parameters to gauge the value of the stocks such as industry, market capitalization, price points, etc.

Investors use these indices to capture the idea about a particular segment of the market or the market as a whole. These indices drive the market value of the stocks in a certain direction and are therefore known to be the barometer of the Indian stock market.

An index works on the principle of choosing the best out of the lot, so basically, it identifies the best-performing stocks for each of the market segments as per the trends and puts them into one homogenous basket. India has the two most popular indexes i.e. Nifty and SENSEX. 

What are Nifty and Sensex?

NIFTY is identified as the equity benchmark of one of the most recognized stock exchanges i.e.  National Stock Exchange (NSE). NSE uses NIFTY as an acronym for National Stock Exchange Fifty and evaluates the performance of the best fifty stocks out of the 1600 companies which are actively traded in the Indian stock market. This is decided as per their designated criteria which we shall discuss further in this article. 

Nifty 50 is managed by Index Services and Products Limited, which is a subsidiary of NSE and primarily accounts for index funds, index derivatives, and fund portfolios.

Sensex, on the other hand, is a Gladstone between sensitive and index. It is also identified as S&P BSE Sensex and as the latter name suggests, it is used as a benchmark by the very oldest, Bombay Stock Exchange (BSE). The BSE Sensex accounts for the 30 top-notch, frequently traded shares that are listed on the Bombay Stock Exchange (BSE).

While both these indexes are known to be the most popular and are frequently used by investors, let us understand the difference between the two.

Difference between Nifty and Sensex

BasisNiftySensex
No. of Sectors2413
Base Number1000100
Criteria for InclusionLiquidity, float adjustment, and domicilePrice Fluctuations
Number of Companies5030
Base Year19951997-98

Calculation of Nifty and Sensex

First of all, to be a part of a Nifty 50 list, a company needs to qualify the following criteria

  • The stock must have been traded at an average cost of a minimum of 0.50% in the past six months.
  •  The float-adjusted market cap of the stock must be at least twice to that of the current smallest index composition in the market.
  • The company must be an Indian company and shall be listed on National Stock Exchange (NSE)

Once these companies qualify the above criteria, Nifty 50 is calculated based on the free-floated market capitalisation weighted method. This means that the price of this index reflects the total market value of all the constituting stocks in the index relative to the base period i.e.  November 3, 1995.

Here, 

  • Market Capitalisation = Current market price x Outstanding shares
  • Free Float Market Capitalisation = Shares outstanding x Price x Investable Weight Factors (IWF)
  • Index Value = (Current Market Value / Base Market Capital) x Nifty Base Index Value (1000)

It is to be noted that the aggregate market capitalisation of each scrip in the index during the base period is the index’s base market capitalisation. In the base period, the market capitalisation is equated with an Index value of 100. This is known as the base Index value. Also, the base market capitalization of Nifty accounts for Rs. 2.06 trillion.

Sensex is also calculated by a similar modus operandi. It selects its 30 stocks by using the free-float market capitalisation of these underlying 30 companies along with the base value of the Sensex. These are carried out in the series of the following steps:

  • Firstly,  the market capitalisation of all the top-notch 30 companies is calculated.
  • Then, the free-float market capitalisation of these companies is estimated and clubbed together to reach the total free-float market capitalisation.
  • The formula for Sensex = (Free float market capitalisation of 30 companies / Base market capitalisation) x Base value of the index.
  • Once the free-float market capitalisation is estimated as above. It considers the base market capitalisation i.e.  INR 2501.24 cr. It is the value of the market capitalisation of Sensex for the year 1978-79. The base value of  Sensex100.
  • All these values are used in the Sensex formula to arrive at the value of Sensex.

Best Stocks from Nifty and Sensex

It would be an injustice to our readers to be left high and dry without the information of the top market gainers as per BSE Sensex and NSE Nifty. Let us see what is in the store.

CompanyIndex
Mahindra & MahindraSensex
Maruti SuzukiSensex
ONGCSensex
Coal IndiaSensex
ITCSensex
JSW SteelNifty50
Eicher MotorsNifty50
Reliance IndustriesNifty50
TCS Nifty50
Bharti AirtelNifty50

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

Important things to remember:

1. Do Not Blindly Follow Hot Tips

No matter how credible the source is, never follow a stock marketing tip blindly without conducting thorough research personally. Always select the stocks after doing proper research and analysis on the performance as well as the companies. While some tips can work out to give you huge benefits, the wrong ones can push you down under the risk pretty quickly. 

2. Eliminate Loser Stocks from Portfolio 

There is absolutely no guarantee that a stock will rise after a great fall. Know that it is extremely important to be practical about what is possible and what's impossible in the stock market. So, upon realizing that a stock is performing poorly in your portfolio, accept your mistake and sell it immediately to prevent further losses. 

3. Don't Exceed Your Investment Budget Abruptly 

While it's true that long-term investments are way better than other forms of investment, you shouldn't exceed your investment budget in a haste. Instead, decide on a fixed amount and invest it across various good stocks. Rather than investing in only one stock, divide your budget evenly across multiple good-performing stocks and shares. 

Disclaimer: The securities quoted are exemplary and not recommendatory. Past performance is not indicative of future returns

  • What are the factors that affect the performance of an Index?

  • Which is better: BSE Sensex or NSE Nifty?

  • What are the types of stock market index?

  • Why are stock market indexes important?

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