What are Nifty and Sensex?
In India, there are two stock exchanges; the Bombay Stock Exchange and National Stock Exchange. Each stock exchange needs to have an index to measure the performance of the market. Sensex is the Index of the Bombay Stock Exchange (BSE), and Nifty is the Index of the National Stock Exchange (NSE).
What is Sensex and why?
Sensex, aka Sensitive Index, is the Index for the Bombay Stock Exchange. As discussed earlier, an index is a sample of listed companies that act as the representative. Over 6000 companies are listed under the Bombay Stock Exchange, and practically it would be impossible to analyze the performance individually.
To solve this issue, BSE uses Sensex. Sensex picks up 30 companies that are luring, performing, and best for the market. If these companies are performing poorly, then the market trends are down. However, if only these 30 companies are outperforming, then the market trends are bullish.
Now, the question is, how does a company qualify to fall under Sensex?
There is a certain criterion that the Bombay Stock Exchange use to pick companies under Sensex.
A few of these criteria are –
Average daily turnover.
What is Nifty?
Nifty is the Index used by the National Stock Exchange and is made by a combination of National and Fifty (Nifty). Unlike Sensex, Nifty collects a sample of 50 performing and luring stocks to determine market trends.
Similar to Sensex, Nifty picks stocks from different sectors. Some of these include stocks from the sectors such as IT, Consumer Goods, financial services, automobiles, telecommunication, and more. Besides, stocks picked under Nifty are those that outperform others.
The criteria to qualify for Nifty are –