What is NSE and BSE Index
What is NSE and BSE Index
A stock exchange is a market or market where investors buy and sell shares. We know it in detail and first of all, understand what is the stock market…..
Stock Market:
When you need any goods, you go to the market to buy them and buyers come to sell them. In the market, you also get the goods you need and the person selling it also gets his profit. In the same way, SELLERS and BUYERS buy and sell shares in the stock market as well. The place to buy and sell stocks is called the stock market.
A stock market is a place where investors buy and sell everyday stocks, bonds, and other securities.
According to the World Bank, in 2016, 77.5 trillion dollar stocks have been traded on the stock exchange.
How are indices created?
The index is developed with equal shares. They can be based on company size, type of industry, market capitalization or any other parameters. The value of the index will be calculated once the shares are selected.
The price of each stock is different. And, the change in price in one particular stock is not in proportion to the price change in some others. However, any change in the prices of the underlying stocks can have a significant impact on the overall index value.
For example, if the price of securities rise, the index rises and vice versa. Therefore, the value is calculated with the general average of all prices. Thus, the stock index refers to the direction of commodity, financial, or any other market products along with the market price and price movements as a whole.
In India, free-float market capitalization is widely used instead of using prices to determine index value.
BSE - BOMBAY STOCK EXCHANGE
BOMBAY STOCK EXCHANGE is the oldest and largest stock exchange in India. It was started in 1857 and was initially known as BSC 'The NATIVE SHARE & STOCK BROKERS ASSOCIATION. Later in 1957, the Government of India gave BSC the status of Stock Exchange of India under the Securities Contract Regulation Act,1956.
Since then, the BSC has been functioning as a stock exchange. BSC has more than 5000 companies listed and shares of these companies trade in the stock market every day. Since its inception, BSC has grown continuously and it is the only way of growth that more than 5000 thousand companies are listed on BSC.
The BSE benchmark index is the Sensex and its index started in 1986. To put it simply, out of the listed companies in the BSE, Sensex issues an index of companies whose stock performs well in the market. The job of Sensex is to issue the Index of Listed Companies. Sensex consists of 30 companies, meaning Sensex recognizes the top 30 stock trading companies. Earlier, trading of shares on BSC was done through papers but later in 1995, BOLT (BSE ON-LINE TRADING) was introduced. With the introduction of Bolt, the process of buying and selling shares on BSC has now become online.
BSC is the first stock exchange in Asia and in addition to being the first stock exchange, it is also the 12th largest stock exchange in the world. Its market capitalization (MARKET CAPITALIZATION) in 2017 was more than $ 2 trillion. The official site of BSC is bseindia.com.
(NSE- NATIONAL STOCK EXCHANGE)
NSE is the second stock exchange in India on which thousands of investors buy and sell shares every day. It is the second major stock exchange company. There are more than 1600 companies listed on NSC. It was established in 1992 when the NSC, under the Security Contract Act, 1956, functioned only as a tax-paying company. Subsequently, from 1993, NSC started functioning as a stock exchange.
With the advent of NSE, the electronic exchange system was introduced in the Indian stock market. Earlier the stock market work was done through a paper system, but after the NSE acted as a stock exchange, the stock market became based on the electronic system, due to which it became quite easy to invest in the stock market. NSE made the stock market automated and due to this, there was a lot of transparency in the market.
NSE is the benchmark index of Nifty and Nifty consists of 50 companies. Hence Nifty is also known as Nifty-50. The Nifty issues an index of these 50 companies. Although the National Stock Exchange has started after the Bombay Stock Exchange, the global rank of the National Stock is 11.
If you pay attention to the report of NSE, its market capitalization in 2017 was more than $ 1.41 trillion. The official site of NSE is nseindia.com. Both NSE and BSE are based in Mumbai.
BSE and NSE are both benchmark indices. We also know what this benchmark index is and how it works…..
What is Sensex and Nifty:
Sensex and Nifty are both benchmark indices. The SENSEX is the benchmark index of the BSE and the Nifty is the benchmark index of the NSE. Let's understand both of them in a little detail.
The SENSEX is the benchmark index of the BSE and consists of 30 companies. More than 5 thousand companies are listed in BSC. No one can monitor so many companies at once. That is why Sensex was started in 1986 with the objective of getting the right index of these companies. The Sensex term was first used by stock market analyst Deepak Mohoni.
The SENSEX indexes the top 30 companies among the listed companies in the BSE by market cap. There is a committee to choose these 30 companies. If any of these 30 companies do not perform well, then they are removed from this index.
The company that performs well in its place is included in it. The decision to remove a company and to include another company is taken by the index committee.
When the SENSEX mark is in green color, the market is performing well and when the SENSEX is in red mark then the stock market is in poor condition.
NIFTY:
The Nifty is the benchmark index of the NSE and includes 50 companies. That is why it is also known as Nifty-50. The Nifty also includes the top 50 companies that have a good performance in the market.
The Nifty issues an index of the shares of these 50 companies included at the top. It started in 1996. The Nifty is operated by the Indian Index Services and Products Limited And the IISL is completely under the NSE Strategic Investment Corporation Limited.
Nifty shows the status of the shares of 50 companies that are involved in it. The shares of the companies involved are bought and sold more. In this, listed companies are selected from different sectors and these companies choose the index committee.
Like the Sensex, when the companies involved in the Nifty perform poorly, the Nifty moves towards the bottom, and when the companies perform well, the Nifty moves upwards.
Difference between SENSEX and NIFTY
The Sensex and the Nifty are the benchmark indices of two major stock exchanges in India. But then there is a lot of difference between these two.
The SENSEX is the benchmark index of the BSE and the Nifty is the benchmark index of the NSE Nifty.
The Sensex comprises 30 companies and the Nifty has 50 companies listed.
Due to 50 companies involved in the Nifty, its index is more trusted.
The Sensex was started in 1986 and the Nifty started in 1996.
The job of both Nifty and Sensex is to issue indices for BSE and NSE. Only a few small and big things make them different from each other.
The similarity between Sensex and Nifty:
Both the Sensex and the Nifty serve as benchmark indices of the Stock Exchange (BSE & NSE). The work of both of them is quite similar, only the work of these two makes the companies involved in the different. The job of both is to tell the condition of the market. Both include large companies of different sectors and the choice of the big companies involved in both is index indexed. The index committee decides which company will remain in the Sensex and Nifty and which company will not be a part of them.
Importance of Sensex and NIFTY:
You already know how many companies are listed in BSE and NSE. Investors buy and sell shares in the number of thousands every day. Now if all these companies do not have indices, then there will be a lot of trouble in the investment.
That is why an index is also needed to know the condition of the market properly, and Nifty and Sensex do this index.
Sensex and Nifty index shows the market's condition immediately. How much the stock market has gone or going to go or how much will fall below, is known from the index of Sensex and Nifty. Sensex and Nifty are very important to know the movement of the stock market.
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