The two biggest stock markets in India are the Bombay Stock Exchange, or BSE for short, as well as the National Stock Exchange. The BSE Sensex and the Nifty 50 are the respective benchmark indexes used by both exchanges to monitor the performance of the whole market. In this post, you will learn what the BSE Sensex is, how it differs from the NSE, and how their respective benchmark indexes compare to one another.
The Bombay Stock Exchange’s (BSE) 30 largest, most established, and financially stable firms make up the BSE Sensex, a stock market index. Asia Index Private Limited launched it in 1986, although it is currently calculated as well as published in real-time. The BSE Sensex’s 30 firms are chosen based on factors such their market capitalisation, and liquidity, as well as public float. They stand for important sectors including IT, finance, oil & gas, FMCG, and utilities, among others. As a market-weighted index, the BSE Sensex gives more weight to businesses with bigger market capitalizations.
This indicates that the index value is more sensitive to changes in their stock prices. The BSE Sensex is an accurate depiction of the entire market performance according to the index weighting mechanism. The BSE Sensex, the country’s oldest stock market index, is closely watched by institutional investors, mutual funds, as well as research analysts to determine investor sentiment on the equities markets. Increased investor confidence in India’s economy and business climate is shown by an increase in the BSE Sensex. Given that the member stocks are market leaders in their respective sectors, it is frequently used to gauge long-term market trends. As a result, the BSE Sensex serves as a trustworthy indicator of the Indian stock markets.
Despite the fact that both indexes track the whole stock market, there are several significant distinctions among the BSE Sensex as well as Nifty 50:
- Constituents: The BSE Sensex contains 30 constituent equities, whereas the Nifty 50 has 50.
- Weight: The BSE Sensex allows a maximum weight of 33% for each stock, whereas the Nifty 50 allows a maximum weight of 25% for each stock.
- Sector Representation: When compared to the Nifty 50, which has a more varied sector representation, the BSE Sensex has a larger proportion of financial as well as banking firms.
- Liquidity: Due to NSE’s larger market share, Nifty 50 is more liquid as well as has higher trading volumes than the BSE Sensex.
- Returns: Because of the Nifty 50’s greater representation of mid-cap stocks, it has historically had somewhat better returns than the BSE Sensex.
- Popularity: In comparison to the BSE Sensex, the Nifty 50 is more well-liked and followed globally.
While both BSE Sensex and NSE Nifty 50 are important benchmarks of the Indian stock market, NSE has emerged as the larger and more dominant stock exchange. The Nifty 50 index also provides better representation of the overall market. However, the BSE Sensex continues to be an important gauge of how the Indian economy is performing. Investors must keep a close watch on both these indices and India VIX as well, to make well-informed investment decisions.