BSE SENSEX vs. NSE Nifty: A Comparative Analysis

Published on: Fri Mar 10 2023

There are two main stock market indices in India: the BSE SENSEX and the NSE Nifty. Both indices represent/reflect the overall performance of the Indian stock market, but they differ in important ways that set them apart. We'll compare and contrast the BSE SENSEX and NSE Nifty in this blog to help you understand their similarities and differences.

BSE SENSEX

The BSE SENSEX, also known as the Bombay Stock Exchange Sensitive Index, is the Bombay Stock Exchange's primary stock market index (BSE). The index consists of 30 of the BSE's largest and most actively traded stocks. The BSE SENSEX is a market capitalization-weighted index, which means that each stock in the index is weighted proportionally to its market capitalization.

NSE Nifty

The NSE Nifty, also known as the National Stock Exchange Fifty, is the National Stock Exchange's primary stock market index (NSE). The index consists of 50 of the NSE's largest and most actively traded stocks. The NSE Nifty, like the BSE SENSEX, is a market capitalization-weighted index.

The differences between the BSE SENSEX and the NSE Nifty

Number of Stocks:The BSE SENSEX contains 30 stocks, whereas the NSE Nifty contains 50 stocks. This means that the NSE Nifty is a more diverse stock portfolio than the BSE SENSEX.

Stock Composition: While both indices are market capitalization-weighted, the stock composition in each/every index differs. The BSE SENSEX is more concentrated in sectors such as energy, consumer goods, and healthcare, whereas the NSE Nifty is more concentrated in financial services, information technology, and consumer goods.

Stock Weighting: The weighting of individual stocks in each index varies. The top five stocks in the BSE SENSEX account for more than 50% of the index weightage, while the top five stocks in the NSE Nifty account for around 40% of the index weightage.

Exchange: The Bombay Stock Exchange underpins/validates the BSE SENSEX, while the National Stock Exchange underpins the NSE Nifty. This means that the companies in each index are listed on various exchanges, which can affect their liquidity and trading volume.

The similarities between the BSE SENSEX and the NSE Nifty

Market Capitalization-Weighted: Both indices are market capitalization-weighted, which means that the weight of each stock in the index is proportional to its market capitalization.

Widely Followed: Both indices are widely followed/observed as a benchmark for the Indian equity market by investors, traders, and financial institutions.

Real-Time Calculation: During trading hours, both indices are calculated in real-time, with updates every few seconds.

Conclusion

Finally, the BSE SENSEX and NSE Nifty are two primary Indian stock market indices that reflect the overall performance of the Indian stock market. While both indices are market capitalization-weighted and widely followed, they differ fundamentally in their stock composition and weightage. Understanding these distinctions can assist investors in making informed investment decisions and building a well-diversified portfolio.

Returns are subject to market risk.

Past performance do not assure future returns.

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