What is Nifty, Sensex and Banknifty?
What is a Stock Market Index?
A stock market index is a unit that measures a stock market, or a subset of the stock market, that helps to compare current price levels with past prices to calculate market performance. Similar kinds of stocks are chosen and grouped together. Criteria of stock selection could be the market capitalization, type of industry, or the size of the company. Any change happening within the underlying stock prices impact the general value of the index. If the costs of most of the underlying securities rise, then the index will rise and vice-versa. Let us discuss 3 major Stock indexes of the Indian Stock Market.
What is Nifty 50?
Nifty 50 is a stock market index. It was introduced by National Stock Exchange on 21 April 1996. It is a benchmark showcasing the top 50 stocks listed on National Stock Exchange. Nifty is an abbreviation of the National stock market Fifty. These stocks are from across 12 sectors of the Indian economy which include – financial services, information technology, consumer goods, entertainment, financial services, energy, pharmaceuticals, telecommunications, cement, metals, automobiles, pesticides and fertilizers, and other services. Some companies listed in Nifty 50 are Reliance, HDFC, HDFC Bank, Coal India, etc. Nifty is additionally calculated through the free-float market capitalization-weighted method. The Index is decided on a day to day by taking into consideration the present market price divided by base market capital then multiplied by the bottom Index Value of 1000.
What is Sensex?
Same as Nifty 50 Sensex is an index introduced by the Bombay Stock Exchange in 1986. It is an abbreviation of the Stock Exchange Sensitive Index. It is also known as S&P BSE Sensex. It is a free-float market-weighted stock exchange index of 30 well-established and financially sound companies listed on the Bombay stock market. The level of Sensex may be a direct indication of the performance of 30 stocks within the market. The free-float method takes into consideration the proportion of the shares which will be readily traded within the market. This doesn't include those held by various shareholders and promoters or other locked-in shares not available within the market.
What is the Bank Nifty?
Bank Nifty is an index comprised of the foremost liquid and enormous capitalized Indian banking stocks. The index has twelve stocks from the banking sector. Top companies that are included in the Bank Nifty Index including their weightage as released by NSE India on August 1, 2020, on basis of closing prices of July 31, 2020 are HDFC bank with 26.68% and ICICI Bank with 18.70%.