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In India, the NSE (National Stock Exchange) & the BSE (Bombay Stock Exchange) are two major stock exchanges The stock exchange is a market where a deal is made between the buyers and sellers of the shares Both Nifty and Sensex are indices Sensex is the main index of the Bombay Stock Exchange while Nifty is the National Stock Exchanges' main index There are more than 5000 companies listed on the Bombay Stock Exchange While about 1600 companies are listed on the National Stock Exchange And it's quite difficult to track these companies to know the market's condition and that's why the index has been formed You don't need to track all the companies in India to know the situations of a few companies Only by observing Nifty & Sensex, you can figure out whether the market is up or down. When the Sensex or Nifty is up i.e if they are green in colour, then we say that the stock market is up While when the Sensex or Nifty appears in red colour or signal, we say that the stock market is down As I already said earlier, just like blood reports explain the health of the patient Similiarly, Nifty & Sensex defines the current situation of the stock market
If Nifty & Sensex are green in color, it implies that they are trading at the prices higher than yesterday This again means that Nifty & Sensex are above the trading point where they closed yesterday If Nifty & Sensex are in red color, it means that they are at prices lower than the previous trading day's closing value The term 'Sensex' is created by combining the words 'Sensitive' and 'Index' Sensex is build by combining the 'Sens' from Sensitive and 'ex' from Index. In Sensex, 30 well-established companies from different sectors having excellent track records are present Which means that the Sensex's movement is completely dependent on the share price movements of these 30 companies However, the word 'Nifty' is formed combining the two words- National and Fifty Fifty is there because 50 companies are available in the Nifty In Nifty, 50 well-established companies from different sectors having excellent track records are present Which means that the Nifty's movement is quite dependent on the share price movement of these 50 companies Nifty that is the main index of the NSE is also known as Nifty 50
In simpler terms, the Sensex's movement depends on the performance of 30 companies present in the Sensex While Nifty's movement depends on the performance of 50 companies present in the Nifty Big, popular, and well-established companies in their sectors are generally available in the Nifty And these companies are picked from various other sectors This way Nifty and Sensex covers companies from different sectors That's why the performance of the Nifty & Sensex depict the performance of the stock exchanges The stock exchanges have different other indices as well The NSE & BSE has almost all indices present In sectoral indices, the well-established companies of a particular sector are present So, if you want to track just the banking sector & see how it is performing then you can check the on the indices by viewing BANKEX at BSE or BANK NIFTY at NSE On the stock exchange, the small-cap and mid-cap companies too have separate indices Such as S&P BSE Small-Cap, S&P BSE Mid-Cap, Nifty Mid-Cap Fifty, etc.
To know the condition of large-cap, mid-cap, and small-cap and what they are, view our lecture on Market Capitalization in which we have explained large-cap, mid-cap, small-cap quite well Nifty, Sensex, and other indices are used as Benchmarks also It means that you can figure out through Nifty and Sensex that whether your investment has provided you better returns or not For example, in 2014, Nifty provided a return of 31.43% which means Nifty rose by 31.43% in 2014 and Sensex in 2014, provided 29.58% return which means that Sensex in 2014, rose by 29.58% So, if your investments gave you more returns than this, then you can say that your returns on investments were amazing. And if your investments provided you with a lesser return, then you can say that your returns on investments weren't good. Similarly, if you have invested in a banking stock, then you can compare your returns at BANKEX on BSE & BANK NIFTY on NSE
If you have invested in Mid-Cap stocks, then you can compare your mid-cap returns with mid-cap indices Sensex & Nifty are calculated using Free Float Market Capitalization method Sensex is the Free Float Market Capitalization weighted average of 30 companies available under Sensex and Nifty is the Free Float Market Capitalization weighted average of 50 companies present under Nifty You don't need to go in details about the calculation of Nifty and Sensex You just need to focus on whether Nifty and Sensex are increasing or decreasing In some other lecture, we will cover how to calculate Nifty and Sensex If a stock available in Nifty/Sensex is continuously performing bad Then the stock exchange can replace it with well-established and consistently good performing stock And this decision is solely made by the stock exchange For instance, in 2016, NSE replaced Ciarn India, Vedanta, and PNB with Aurobindo Pharma, Bharti Infratel, and Eicher Motors The way you discover the current situation of Stock Market India through Nifty & Sensex Similarly, you can know the stock market conditions of foreign countries by viewing major indices of stock exchanges
For example, if you want to know the stock market situation of Japan, then you can view NIKKEI, index of Tokyo Stock Exchange If you wish to learn the stock market, then please visit our website- www.finnovationz.com If you need any help regarding the stock market, you can call or Whats App us at 09049641491
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