What is NSE and Nifty?

Posted by Karan Sharma on October 4th, 2022

After hearing the benefits and advantages of stock investing, everyone wants to invest in the stock market. However, when you start, you realize that investing is not child's play. Before you start learning to pick stocks and decide your investing style, you will want to familiarize yourself with the entities that make up the stock market. You do not want to hit a roadblock when you stumble upon terms like BSE, nse sensex, or CDSL. This article will expound upon two popular stock market terms, the "NSE" and the "Nifty." 

What is NSE? 

The NSE, which stands for National Stock Exchange, is one of India's two major stock exchanges. A stock exchange is one of the primary constituents of a stock market. When it comes out with its initial public offering (IPO), retail investors can trade its stock, for which the company lists itself on the stock exchange. So, a stock exchange is a platform where traders buy or sell shares. 

Therefore, if a company wants the general public to trade or invest in its share, it must list on at least one major exchange in the country. The NSE is one of the world's top ten stock exchanges in market capitalization and has around 2,000 listed companies. Established in 1992 and headquartered in Mumbai, the NSE facilitates electronic trading and has computer terminals in multiple cities. Hence, investors trading on the NSE get real-time data regarding price fluctuations. In addition, the NSE lets investors invest in products like stocks, exchange-traded funds (ETFs), mutual funds, and derivatives.  

What is Nifty?

In 1995, the NSE introduced the CNX Nifty market index, which you may know as the Nifty 50 or simply as Nifty. A stock market index consists of several companies trading on a stock exchange. As the name suggests, the Nifty consists of 50 companies, which are the top 50 companies trading on the NSE. An index like the Nifty represents the entire stock market, so investors refer to such indices to gauge the overall market's performance. 

The Nifty is calculated using a mathematical method called the free-float market capitalization-weighted method. The rebalancing of the Nifty takes place bi-annually, wherein a few of its constituents may be replaced with new ones. In 1995, the Nifty started with a base value of 1000. Today as of 1st October 2022, it sits above 17,000. 

So, these are the essentials you must know about the NSE and the NIfty before investing. Of course, the Nifty is related to the NSE, so it is "NSE Nifty" and not "NSE Sensex." The Sensex is the bench market index of the BSE, and you could consider learning more about it by visiting the IIFL Securities knowledge center.

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Karan Sharma

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Karan Sharma
Joined: May 29th, 2021
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