What is Sensex & nifty | Which is better nse or bse

 

What Is Sensex & Nifty | Which Is Better NSE OR BSE

Stock Market Exchange

Before understanding Nifty & Sensex, it is important to know about Indian stock exchange. So, stock exchange is a place where shares are bought and sold, that is commonly called as stock market. Stock exchange is basically a centralized place that brings corporations and governments, so that investors can buy and sell equities. It is named as stock exchange because it is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments.

The Amsterdam Stock Exchange is considered as the world’s oldest stock exchange, which was established in 1602 by Dutch East India Company. To raise capital, the company decided to sell stocks and pay dividends of the shares to investors. In India, the two most popular stock exchange are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Bombay Stock Exchange (BSE) is an Indian stock exchange, established in 1875 by businessmen Premchand Roychand. BSE is the oldest stock exchange in Asia and also the 10^th oldest in the world. The BSE is located in Mumbai, India.

Bombay Stock Exchange (BSE)

 National Stock Exchange (NSE) is the leading stock exchange in India, was set up by a group of leading Indian financial institutions at the behest of the Government of India, in 1992 and was recognized as stock exchange by SEBI (Securities and Exchange Board of India) in April 1993. NSE is world’s largest derivative exchange in 2021 by the number of contracts traded based on the statistics maintained by Futures Industry Association, a derivative trade body.

National Stock Exchange (NSE)

But what is Nifty & Sensex? Nifty and Sensex are the standard index values for measuring overall performance of stock market. To know the economic development of the country, there is a criterion i.e., by analyzing the financial performance of the companies. But in stock market thousands of companies are listed and to track the stock of every company would be difficult. So, for this, a sample is taken from companies, that represents the whole market and this small sample is called “index”. The index for Bombay Stock Exchange (BSE) is called as “Sensex” & the index for National Stock Exchange (NSE) is called as “Nifty”.

“Sensex” is also called as “BSE 30”, because out of all the companies listed is BSE top 30 companies are selected, on the basis of their market capitalization and that provides a gauge of India’s economy. Sensex was launched on January 1, 1986, as a basket of 30 companies representing the country’s largest and financially sound companies listed on BSE. If Sensex points increases then, it means in these 30 companies, majority have good financial performance, earning good profits, people are purchasing shares of these companies and ultimately demand is increasing. It is also known as “Bull Market. On the other hand, if the Sensex points decreases, then it means companies are not performing well, earning less profit. For Sensex, the base year is 1997-98 and base value is 100 points.

“Nifty” is also known as “Nifty 50”, because in BSE average of top 30 companies is taken whereas in NSE top 50 companies average is taken. For Nifty, the base year is 1995 and base value is 1000 points. Nifty is managed by Index Services and Products Limited, which is a subsidiary of NSE and primarily accounts for index funds, index derivatives, and fund portfolios.

How to Calculate Sensex and Nifty

To calculate Sensex the formula is: (total free float market capitalization/base market capitalization) * Base Index Value.

The Nifty 50 is computed using a float adjusted, market capitalization weighted methodology, where in the level of the Index reflects the total market value of all the stocks in the index relative to a particular base period.

Which Is Better for Investment NSE or BSE

If we see NSE is the biggest stock exchange while BSE is the oldest one. NSE has more trading volume as compared to BSE, NSE has more liquidity than BSE. The volume shares are generally higher on the NSE, which means if you are selling sizeable quantities the NSE could be at a better position. It is impossible to get similar prices on both the exchanges. Some shares are not traded on NSE, which will force you to buy or sell the shares on BSE.

If you are an investor or just started investing and want to invest in shares of new companies, Bombay Stock Exchange (BSE) would be an ideal choice. But if you are an intraday trader, risking share trading with derivatives, futures and options, National Stock Exchange (NSE) would be a preferred choice. Also, NSE has better software for high-risk online transactions.

All the things depend upon your goals, circumstances. Both NSE and BSE are safe-secured and provides good online services.