Nifty and Sensex: What’s the Difference and Which One Should You Track?

If you have had the chance to watch financial news reporting or even scroll through a stock market app, you may have heard names like Nifty and Sensex being thrown around. Headlines such as "Sensex jumps 500 points" or "Nifty closes in the red" commonly occur. But if you are just getting the hang of the stock market, these may appear confusing.

So, what are Nifty and Sensex? Are they the same thing? Why are they important? And most importantly, which one should you be watching?

Let's get the gist in clear language-that is, with no jargon-so that you are clear and confident about the basics.

What Is a Stock Market Index?

Before we introduce Nifty and Sensex, let's understand a basic concept first.

Imagine wanting to know if the Indian economy is fairing well, but cannot possibly track every company out there. So, here's a stock market index.

A stock market index is a group of selected stocks that represent a portion of the entire market. When these companies do very well, the index rises. When they underperform, the index falls. This way, we get to understand the overall mood of the market rather than having to follow every single company.

Now, let's talk about the two most famous stock market indexes in India—Nifty and Sensex.

What is Sensex?

The full form of Sensex is a "stock exchange Sensitive Index. It is the main index of India's oldest stock exchange, BSE

The Sensex was launched in 1986 and tracks the performance of 30 of the largest and most trusted companies from different sectors such as banking, IT, energy, and manufacturing.

some of the well-known companies that are usually included in the Sensex are:

• Reliance Industries

• TCS(TATA Consultancy Services)

• HDFC bank

• Infosys

• ITC

If the performance of these companies is good, then the Sensex rises. and if their performance is weak, then the Sensex falls.

What is Nifty?

The full form of Nifty is "National Stock Exchange Fifty" (Nifty 50) It is the main Index of India's second major exchange, NSE.

Nifty was launched in 1996, and it shows the performance of 50 large companies from different sectors like pharma, banking, IT, FMCG, auto, etc.

some of the popular companies that are included in the Nifty 50

• ICICI Bank

• Bajaj Finance

• HDFC bank

• Hindustan Unilever

• Wipro

Just like the Sensex tracks 30 companies, Nifty tracks 50 companies and predicts the market movement accordingly.

Differences Between Nifty and Sensex:

Now that you understand the meaning of both, let us also understand the difference between them in simple language.

1. Number of companies

Sensex has 30 companies, while Nifty has 50 companies. Nifty shows a more detailed picture of the market.

2. Stock exchange:

Sensex is based on BSE, and Nifty is based on NSE

3.Year of commencement:

Sensex was started in 1986, while Nifty was launched in 1996

4.Market representation:

Sensex represents slightly more stable companies, while Nifty is a bit more diversified.

In short:

• Sensex: 30 large companies (BSE)

• Nifty 50 large companies (NSE)

Why are these indices so important?

Nifty and Sensex are important because they tell us whether the Indian stock market is going up or down. if both Indices are going up, it means that most of the companies are performing well, and investors' confidence remains intact.

If they are falling, it means there is fear or uncertainty in the market.

These are used by many people :

• Investors: to know whether it is right to invest now or not

• Government agencies need to understand the economic condition of the country

• Mutual Fund Manager: To create the fund's portfolio

• Media: To provide market updates

In simple words, Nifty and Sensex are like the pulse of the market.

Should You Track Nifty or Sensex?

Now, the biggest question is who should you follow?

If you buy shares from an app, invest in mutual funds, or trade, in most cases, you are dealing through NSE. therefore, tracking Nifty is more useful for common investors.

However, the Sensex is also a very strong and reliable index. Even though it has fewer companies, they are the most stable companies in India.

Many people follow both because they usually move similarly.

If you are new, then start following only Nifty. slowly, you will start understanding Sensex and the rest of the market as well.

Do Nifty and Sensex Always Move the Same Way?

Most of the time, YES.

Because both of the indices track large and prominent companies, if the market is rising, both indices go up. If the market is falling, they both go down.

There is a big difference that on some days Nifty can go up a lot and Sensex can go down a little, or vice versa. This happens because the number of companies in both is different.

But overall, both of them show you the direction of the market correctly.

Can You Invest in Nifty or Sensex?

Absolutely can.

You cannot buy Nifty or Sensex directly, but you can invest in Index funds or ETFs based on them.

example:

• Nifty 50 Index Fund: Invests in all 50 companies of Nifty.

• Sensex Index Fund: Invests in 30 companies of Sensex

These funds are especially good for new investors because:

• Are less expensive

• Risk is reduces

• Move with the market

If you believe in India's growth in the long term, then these funds can be a smart investment option for you.

Final Thoughts

Understanding Nifty and Sensex is not as difficult as it sounds when you hear it for the first time. These just indices that tell you how the market is doing.

• Sensex is based on 30 big companies , BSE

• Nifty 50 Largest companies, Based on NSE

• Market movement can be understood from both

• you can follow one or both.

• you can also invest in funds based on these

If you are new to the stock market, just start tracking NIfty daily. slowly you will yourself feel that you have started understanding the market.

The stock market is not Magic - it is a journey of learning and understanding. And starting with Nifty-Sensex is a great step.