Difference Between Sensex and Nifty

The two most significant indices on the Indian stock market are Sensex and Nifty. They serve as the reference indices against which the majority of other indices and stocks measure their performance.

Nevertheless, in order for investors to gain a deeper understanding of the stock market, they must become aware of specific Sensex and Nifty similarities and differences. But first, let’s define an index before delving into the specifics of Nifty vs Sensex.

Understanding Nifty and Sensex

Nifty

The National Stock Exchange’s (NSE) equity benchmark index is called Nifty, which stands for National Stock Exchange Fifty.

The number of stocks that each index is made up of is one of the most significant differences between the Sensex and the Nifty. The top 50 of the nearly 1600 companies that are actively traded on the NSE across 24 sectors are represented by the Nifty 50.

Nearly 65% of the index’s total free-float market capitalization is comprised of these 50 stocks.

Sensex

The Bombay Stock Exchange’s (BSE) market index is known as the Sensex. It also goes by the name S&P BSE Sensex.

The fact that Sensex is the older of these two indices is another important consideration when comparing Sensex and Nifty. In 1986, the Bombay Stock Exchange began using a weighted market capitalization method and introduced the Sensex. The Sensex transitioned to the free-float market capitalization method later in 2003. Sensex is calculated using a base value of 100.

The fact that 1978–1979 is the base year taken into account for its calculation is another significant distinction between the Sensex and Nifty.

How to Calculate Nifty?

The free-float market capitalization weighted methodology is used to calculate the Nifty. As a result, it represents the total market value of the Nifty constituents relative to the base period, or 3 November 1995.

The market capitalization of the constituents must first be determined in order to calculate the Nifty index. This is done by multiplying the number of shares by the prices of those shares.

Market Capitalisation = Outstanding Shares x Price

Second, multiply the original market capitalization by the Investable Weight Factor (IWF) to get the free-float market capitalization. IWF stands for the percentage of shares that are available for free trading on the stock market. In other words, it refers to the proportion of a company’s shares that are not held by its promoters or directors.

Free-float market Capitalisation = Market capitalisation x IWF

In order to determine the index value, the current market value must first be divided by the base market value, and then the result must be multiplied by the base index value (1000).

Index Value = (Current Market Value / Base Market Capital) x 1000

Note: The base market capital of Nifty is Rs.2.06 trillion.

This index denotes the returns an investor can earn if they invest in that specific portfolio.

How to Calculate Sensex?

The methodology used by Sensex is similar to that of Nifty. Based on a free-float market capitalization formula, the Sensex is determined. So, like the Nifty, this index also reflects the total market value of the 30 constituents in relation to its base period, which is 1978–1979, in a similar manner.

Prior to calculating the Sensex, it is necessary to determine each company’s market capitalization using the aforementioned formula. Second, one must multiply the derived market capitalization by a free-float factor in order to determine the free-floating market capitalization.

Free-float Market Capitalisation = Market Capitalisation x Free-float Factor

The free-float market capitalization of those 30 companies will then be divided by the index divisor of 100 to calculate the Sensex.

Index Value = Free-float Market Capitalisation / Index Divisor

The relationship between the base period and the current period is established by this index divisor. Additionally, that divisor makes it easier to compare data from various time periods.

Like Nifty, Sensex depicts the potential returns from investing in that portfolio. Investors could compare the returns of the Sensex and the Nifty.

What is the Difference Between Sensex and Nifty?

Even though they are both broad-market indexes, there are some differences between Sensex and Nifty that one should be aware of.

This following table enumerates the differences between Sensex and Nifty.

Parameters	Nifty	Sensex
Full-form	National and Fifty	Sensitive and Index
Aliases	Nifty 50 and S&P CNX Fifty	S&P BSE Sensex
Owned by	It is both owned and managed by Index and Services and Products Limited (IISL), an NSE subsidiary.	It is owned by the Bombay Stock Exchange (BSE).
Base number	Its base number is 1000	Its base number is 100
Base period	Its base period is 3rd November 1995.	Its base period is 1978 – 79.
Base capital	Rs.2.06 trillion	N/A
Number of constituents	Nifty 50 constitutes the top 50 companies that are actively traded in NSE.	Sensex comprises the top 30 companies actively traded in BSE.
Number of sectors covered	Nifty is a broader market index that covers 24 sectors.	Sensex covers 13 sectors.