Every evening, news channels report that "Sensex rose 300 points" or "Nifty closed lower". These two numbers are the most common way to describe how the Indian stock market performed. But what exactly are they?
What is a stock market index?
An index tracks the combined price movement of a group of stocks. Instead of looking at thousands of individual shares, an index gives a single number that represents a market or segment.
Nifty 50
- Managed by NSE Indices, a subsidiary of the National Stock Exchange.
- Contains 50 large, liquid companies across major sectors.
- Calculated using the free-float market capitalisation method — companies with a larger value of publicly tradable shares have more weight.
Sensex
- Managed by Asia Index, associated with BSE (Bombay Stock Exchange).
- Contains 30 large, well-established companies.
- Also uses the free-float market capitalisation method.
Nifty vs Sensex
| Nifty 50 | Sensex | |
|---|---|---|
| Exchange | NSE | BSE |
| Number of stocks | 50 | 30 |
| Calculation | Free-float market cap | Free-float market cap |
| Derivatives activity | Very high | Lower, but growing |
Because both contain India's largest companies, they move very similarly.
Why the indices move
- Company earnings of the largest constituents.
- Interest rates and inflation, including RBI policy decisions.
- Foreign and domestic institutional flows.
- Global markets, oil prices and the rupee.
- Government policy, the Union Budget and major events.
Heavyweight stocks have the biggest impact: a large move in one or two of the largest companies can move the whole index.
Other important indices
- Nifty Bank — banking stocks (Nifty vs Bank Nifty).
- Nifty Midcap and Smallcap indices — smaller companies.
- Sectoral indices — IT, pharma, auto, FMCG and more.
- India VIX — a measure of expected volatility.
How to invest in Nifty or Sensex
You cannot buy an index directly, but you can buy products that track it:
- Index mutual funds — available through SIPs, simple and low-cost.
- Index ETFs — trade on the exchange like shares.
Read index funds for beginners and explore index funds in our mutual funds section.
Follow the indices live
Our markets dashboard shows Nifty, Sensex, Bank Nifty and global indices with live charts. Check market timings and the stock market holiday list to plan your week.
What "points" really mean
News often reports index moves in points: "Nifty fell 200 points". Points mean little without context. A 200-point fall at a Nifty level of 25,000 is a 0.8% move — a normal day. The same 200 points at a level of 8,000 would have been 2.5%. Always think in percentages. You can convert quickly with our percentage calculator.
How often index constituents change
Index committees review constituents periodically (usually twice a year) based on rules about size, liquidity and free float. Companies that grow move into the index; those that shrink move out. This automatic renewal is one reason long-term index investing has worked well historically — the index keeps itself updated without you doing anything.
Indices as a benchmark
Mutual funds and portfolio managers compare their returns with indices. If a large-cap fund cannot beat the Nifty 50 over five years after costs, many investors would be better off in a low-cost Nifty index fund. Compare funds and indices side by side with our mutual fund comparison tool.
Key takeaways
- Nifty 50 tracks 50 large NSE-listed companies; Sensex tracks 30 large BSE-listed companies.
- Both use free-float market capitalisation and move very similarly.
- Earnings, rates, flows, global markets and policy drive index moves.
- You can invest in them through index funds and ETFs.
Frequently asked questions
Which is better, Nifty or Sensex?
Neither is better — they represent the same large-cap segment. Nifty has more stocks and is more widely used for derivatives.
Why is Nifty around 25,000 while Sensex is much higher?
They started from different base values on different dates, so their absolute levels differ. Percentage moves are what matter.
Can I trade Nifty?
You can trade Nifty futures and options, or buy index ETFs. Derivatives are risky — learn first.
What makes the index fall sharply?
Usually a combination of weak global cues, foreign selling, interest-rate worries or major negative news.
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