All you need to know about Sensex and Nifty

Posted by aarav badhe on July 21st, 2019

A large percentage of investors gravitate to the stock market like fireflies, since it has a majority of investors. A stock market is a place where individuals can make large amounts of money, at the same time an investor will also lose great sums of money. Before starting the process of trading an investor should know basic things like sensex meaning and nifty, to better understand the process for generating good profits, it is also critical to learn about the market and understand how it functions, how trading is done, factors to be considered while trading. Before beginning the process of investing, it is important for an investor to learn about how to invest in stock market.

A lot of investors have doubts about sensex meaning, the sensex is a free float market index of 30 which is well established and financially strong companies that are listed on the BSE (Bombay stock exchange). Nifty is the NSE's (national stock exchange) NSE’s benchmark broad based on the stock market index. Nifty is sometimes referred to as nifty50. Nifty represents the average of stocks of 50 companies across 12 sectors.

Initially the stocks are represented by share certificates which functioned as ownership proof of the company, but now it is dematerialized, and every trading transaction is done through devices by using DEMAT accounts. Some of the stock exchanges in the country are NSE, BSE, Calcutta stock exchange, Bangalore stock exchange etc. But NSE and BSE are the major institutions among them a lot of the stocks are traded in the two exchanges.

The BSE sensex is  referred to as S&P Bombay stock exchange sensitive index or just sensex. The Sensex was introduced on 1st April 1979. There are steps for calculating sensex.

Sensex meaning comprises of stocks of 30 different companies. These companies are generally selected on the basis of a lot of criterias. Market capitalization of the 30 companies is determined. Free float market capitalization of a company is determined. Market capitalization is multiplied with free float factors for getting the free float market capitalization figure. Free float market capitalization of the 30 companies is summed up to arrive at total free float market capitalization.

If an investor wants to calculate sensex, it is gove below:

Sensex = (total free-float market capitalization/base market capitalization) *base index value

Base year is 1978-79 while calculating sensex.

Investing in stock market is a famous option among young investors. Stock markets consist the potential of offering high returns over a short period of time. Stock markets can also bring down the investment to zero in no time, if stock markets are taken lightly or casually.

A lot of investors do not understand the nifty meaning, nifty is an index which is based on market capitalization. Nifty comprises of market capitalization of companies which are weighed by its effect over the index. A company with high market capitalization have more effect on the Index when compared to a smaller company.

How is nifty calculated?

The formula for calculating Nifty is given below:

Index value = current market value/base market capital*base index value (1000)