Market Indices: Sensex & Nifty

When people say "The Market is up today," they are talking about the Index. An Index is a thermometer for the stock market. It tells you the general mood—are investors happy (buying) or sad (selling)?

1. What is an Index?

Imagine a supermarket. To know if "food prices" are rising, you don't check the price of every single item. You check a basket of common items (Rice, Milk, Eggs). Similarly, an Index tracks a basket of top companies to represent the whole market.

2. The Two Giants: Sensex & Nifty

Sensex (Sensitive Index)

• Exchange: BSE (Bombay Stock Exchange).
• Basket: Top 30 largest, most actively traded companies.
• Base Year: 1978-79 (Base Value = 100).
• Current Value: ~72,000 (as of 2024).
• Meaning: If you invested ₹100 in 1979 in these 30 companies, it would be worth ₹72,000 today (excluding dividends!).

Nifty 50 (National Index Fifty)

• Exchange: NSE (National Stock Exchange).
• Basket: Top 50 largest companies.
• Base Year: 1995 (Base Value = 1000).
• Current Value: ~22,000.
• Meaning: Represents 13 sectors of the Indian economy.

3. How is it Calculated?

They use Free-Float Market Capitalization.

• Market Cap: Total Value of company (Share Price × Total Shares).
• Free Float: Shares available for public trading (excludes Promoter/Govt holding).
• Weightage: Bigger companies have more influence.
  • HDFC Bank and Reliance Industries have the highest weightage (~10-13% each).
  • If Reliance moves up 1%, Nifty moves up significantly.
  • If a small company moves up 10%, Nifty barely moves.

4. Why Do We Need Indices?

1. Benchmarking: To compare performance.
   • If your portfolio gave 10% return but Nifty gave 15%, you underperformed.
2. Passive Investing: Index Funds and ETFs simply copy the Nifty/Sensex.
3. Sentiment Indicator: Tells the health of the economy.

5. Sectoral Indices

Apart from the main ones, there are sector-specific indices:

• Bank Nifty: Top banking stocks (Most volatile/traded index).
• Nifty IT: TCS, Infosys, Wipro, etc.
• Nifty Auto: Maruti, Tata Motors, etc.
• Nifty Pharma: Sun Pharma, Dr. Reddy's.

7-Day Action Plan

Day 1: Check the current value of Sensex and Nifty. Is it Green or Red today?
Day 2: Find out the "Top 5 Constituents" of Nifty 50 by weightage.
Day 3: Compare Nifty 50 returns vs Gold returns for the last 10 years.
Day 4: Check "Bank Nifty". Notice how it moves faster/wilder than Nifty 50.
Day 5: Search for "Nifty BeES" (An ETF that lets you buy Nifty for ~₹250).
Day 6: Read about "Rebalancing". (When a bad company is kicked out of Nifty and a new one enters).
Day 7: Set a goal: "I will beat the Nifty" or "I will join the Nifty (via Index Funds)."

Quiz

💡 Final Wisdom: "Don't look for the needle in the haystack. Just buy the haystack." — John Bogle (Founder of Index Investing). Buying Nifty/Sensex is the safest way to own India's growth story.