A common question that is asked in the stock markets very colloquially is “Market kya lagta hai”. While this question does not have a very specific answer, what the person is referring to is the likely levels of the Nifty or the Sensex. The Nifty and the Sensex are two popular indices which capture the gist of the market movement. When the Nifty and the Sensex are consistently moving upwards for a longer period of time, it is referred to as a bull market. On the other hand, if the Nifty and the Sensex are consistently moving downwards then it is generally referred to as a bear market.
But what exactly are the Nifty and the Sensex levels and what do they indicate? How to trade the markets when the Sensex is going up and how to trade the market when the Sensex is going down? What is the essential difference between the Nifty and the Sensex. Firstly, the Nifty is the benchmark index of the NSE while the Sensex is the benchmark index of the BSE. Secondly, the Nifty is a collection of just 30 stocks while the Nifty is a collection of 50 stocks. Thirdly, all indices are calculated based on the base year concept. For the Nifty the base value is taken as 1000 for the year 1995. In the case of the Sensex, the base value is taken as 100 for the year 1979.
As we have seen earlier, both the Nifty and the Sensex represent benchmark indices for the two principal stock exchanges. Here are 3 commonalities between the Sensex and the Nifty…
The methodology of the construction and maintenance of both the indices are broadly the same. We know the concept of the base year but how are the components of the Nifty and the Sensex selected and monitored? Here is how…
Globally, the performance of stock markets is judged by the performance of the indices. Dow Jones in the US, Footsie in the UK, DAX in Germany, Nikkei in Japan and Hang Seng in Hong Kong are the equity benchmark indices. For India, it is the Sensex and the Nifty!
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