If you’re looking to get your feet wet in the world of stock trading, then you’ll need to know about two things before making your first purchase: the Sensex and the Nifty . In this article, we’ll go over what these indexes are, how they work, and why they matter to anyone with an interest in stock trading. Let’s get started! Sensex and Nifty Explained
How to Calculate Sensex
The Sensex is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on BSE. It was introduced in January, 1995 with a base value of 1000 points. The BSE includes all listed stocks on its two recognized stock exchanges: Mumbai Stock Exchange (BSE) and National Stock Exchange (NSE). This means that all domestic incorporated companies are eligible for inclusion in Sensex whether they are domiciled in India or abroad.
How to Calculate Nifty
There are two ways to calculate nifty. The first way is by using a formula that involves taking out every tenth value of sensex. This gives you a sensex divisor, which is then divided by ten to give you the nifty value. Here’s how it works: Each day’s closing value for sensex can be found on any major news site, usually Business Standard or Times of India.
Introduction to Indices
Indices are a bunch of stocks that give you an idea about how a certain segment of stock market is performing. The most common indices are: CNX 500, BSE 100, NSE Nifty 50, BSE 200 etc.
Who uses these indices?
The Sensex, an acronym for Sensitive Index of Share Prices, is used by individual investors as a gauge of portfolio performance. Investors can also use it to determine whether or not they are on track to meet their financial goals. Companies also use it to inform their financial strategies. For example, if a company knows that its stock is underperforming relative to other companies in its industry, it may decide to perform corporate restructuring in order to boost share price.
Example of how these indices are used
Let’s say you want to buy an S&P 500 ETF. Which one should you buy? You could check all 500 companies individually—maybe with a site like Yahoo! Finance—but that takes a lot of time, even if you use an investment app. A much easier way is to look at how each of these companies has been performing in recent months or years.