How Sensex and Nifty Calculated: While reading business news some words come up again and again in which Sensex and Nifty are prominent. It is known through the news that the Sensex touched a record level or the investors lost crores due to the fall in the Sensex, in such a situation, it is natural for the common people to be interested in what are the Sensex and Nifty, due to which the profit and loss of crores of people. joined. Apart from this, even if you are thinking of investing or trading in the stock market, then it is very important to know about them.
Sensex and Nifty are two major large cap indexes which are linked to two major stock exchanges of the country, Bombay Stock Exchange (BSE) and National Stock Exchanges. Both these indexes work to measure volatility in the stock market.
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What is Sensex and how to measure it
Sensex (short for Sensitive Index) is the stock market index indicator of BSE and is referred to as BSE Sensex. It was first adopted in 1986 and shows the stock of 30 companies from 13 different sectors. Due to the fall in these stocks, the Sensex fluctuates. Sensex is calculated using free float method.
This is how the Sensex is calculated
- The market capitalization of all the 30 companies included in the Sensex is calculated. The number of shares issued by the company and the share price multiplied gives the market capitalization of that company.
- Now the free float factor of that company is calculated. It is that percentage of the total shares issued by the company which are available for trading in the market. For example, out of 100 percent shares of a company ABC, 40 percent of the shares are with the government and the promoter, then only the remaining 60 percent will be available for trading. Thus the free float factor for this company is 60 percent.
- The free float market capitalization of that company is calculated by multiplying the free float factor of all the companies in turn by the market capitalization of that company.
- Combine the free float market capitalization of all the 30 companies included in the Sensex, divide it by the base value and then multiply it by the base index value. The base value for the Sensex has been fixed at Rs 2501.24 crore. Apart from this, the base index value is 100. Sensex is calculated from this calculation.
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What is Nifty and how to measure it
National Stock Exchange Fifty or Nifty is the market indicator of NSE. It includes 50 Indian companies from 14 different sectors. Thus it is more diversified than BSE. Similar to BSE, it tracks the market performance of large cap companies. It was launched in 1996 and is calculated on the basis of free float market capitalization.
This is how Nifty is calculated
- Nifty is calculated on the basis of free float market capitalization almost like Sensex but there is some difference also.
- For the calculation of Nifty, first of all the market capital of all the companies is taken out, which is obtained by multiplying the outstanding share by the current price.
- The market cap is then multiplied by the Investable Weight Factor (IWF). IWF is part of the shares available for public trading.
- The free market cap is then multiplied by the weight assigned to the individual stock.
- To calculate Nifty, the current market value of all the companies is divided by the base market capital and multiplied by the base value. The base market capital has been fixed at Rs 2.06 lakh crore and the base value index is 1 thousand.