Nifty 50 and Sensex are the two main stock market indices used in India. The Nifty 50 index covers the 13 sectors of our economy and thus it helps to give a statistical data about the economy and financial conditions of our nation.
Nifty 50 is the major stock market index that is the weighted average of the top performing 50 companies of our country from National stock exchange. Nifty 50 is a benchmark index of the National Stock Exchange (NSE), which represents the performance of the top 50 companies listed on the NSE based on free float market capitalization. Sensex, on the other hand, is the benchmark index of the Bombay Stock Exchange (BSE) and represents the performance of the top 30 companies listed on the BSE based on market capitalization. Both Nifty 50 and Sensex are widely used by investors, traders, and market participants to gauge the overall health and performance of the Indian stock market. In nifty 50 index, banking sector is having more weightage than other sectors in our country. HDFC bank and RELIANCE are the major heavy weights of nifty 50 index as per the latest data. Other heavyweights includes HDFC, INFOSYS, HUL, KOTAK MAHINDRA BANK, TCS etc .The market trend of the stock market are analysed on how the nifty 50 index performs.
Sensex is another Indian stock market index that represents the weighted average of best performing 30 companies from Bombay stock exchange (BSE). Sensex also interprets about the economic condition and financial stability of our nation. Sensex comprises of different sectors covering finance, energy, healthcare, telecommunications, and more. Some of the prominent companies included in Sensex are State Bank of India, Tata Motors Ltd, ITC Ltd, Larsen & Toubro Ltd, and HDFC Ltd, among others.
Sectoral indices represent the index of a particular sector. Sectoral indices are calculated according to the weighted average of the top performing companies in that particular sector. The sectoral index of banking sector is called Bank Nifty, the HDFC bank, KOTAK MAHINDRA BANK, ICICI bank, SBIN etc are the major heavy weights of bank nifty. Other sectoral indices includes NIFTY AUTO, NIFTY FINANCIAL SERVICES, NIFTY IT, NIFTY PHARMA, NIFTY REALTY, NIFTY METALS, NIFTY MEDIA ETC .
INTERESTING FACT – Nifty 50 the Indian index can be traded. Sounds interesting right, Nifty 50 can be traded according our speculation. Sectoral indices like bank Nifty and Nifty Financial services are also tradable.
Analysing the year 2022, the whole year was in a rollercoaster phase of huge volatility and unpredictable market. Nifty has generated a return of (+4.33%) and Sensex has generated a return of (4.44%) last year. Markets have been in a consolidating phase after the all-time high of 18604 in the year 2021. Over the years, Nifty 50 and Sensex have delivered varying returns. The returns of both indices depend on multiple factors such as economic conditions, corporate earnings, global events, and investor sentiment. In the past, there have been periods where Nifty 50 outperformed Sensex and vice versa. For example, in 2017, Nifty 50 delivered a return of around 28.66%, while Sensex delivered a return of approximately 27.91%. However, in 2018, Nifty 50 has generated returns around 3%, while Sensex generated returns by about 6%. Therefore, it is essential to closely monitor the historical returns of both indices to make informed investment decisions. Anyway, both indices generated decent return in the long term and as intelligent investors we have to do our own analysis and stay invested for the long term to create wealth and attain financial goals.
Why Nifty 50 is an economic indicator?
The Nifty 50 index, which represents the performance of the top 50 companies listed on the National Stock Exchange (NSE) in India, is not just a benchmark for the stock market but also serves as an economic indicator. The performance and movements of Nifty 50 index can be highly depended on economic conditions of the country, foreign investors participation, corporates performance etc. The movements and trends of the Nifty 50 index provide valuable insights into the overall health and direction of the Indian economy. Nifty 50 index comprises companies from various sectors such as finance, information technology, consumer goods, automobiles, and more. These sectors are vital drivers of the Indian economy, and the performance of the companies in these sectors has a direct correlation with the overall economic activity in the country. As a result, any significant movement in the Nifty 50 index can provide insights into the performance and outlook of these key sectors, making it an important economic indicator. The Nifty 50 index reflects the collective sentiment of the market participants, including investors, traders, and speculators. The movement of the index is influenced by a variety of factors, such as economic conditions, corporate earnings, global events, and investor sentiment. the movements of the Nifty 50 index can also impact foreign institutional investors’ (FIIs) investment decisions, as they often look at the index’s performance to assess the attractiveness of the Indian market. Therefore, the Nifty 50 index’s performance has a direct impact on investment flows in the Indian economy, making it a crucial economic indicator. As our Indian economy is blooming and nifty also is performing well, investing in our index when undervalued can be considered as a best investment opportunity. When Indian economy grows, our wealth will also keep growing. Investing in nifty provides sectoral diversification benefits and helps to build a balanced portfolio. To make a direct investment in Nifty index we can use Nifty Bees as an exchange trade fund which tracks the nifty 50 index. Nifty Bees is now trading at a value of 192.55 as on 25th April 2023. Before investing having our own research and study is very prominent before taking any asset class into consideration for investing. Always keep in mind stock market investments are subject to risk but proper investment knowledge and analysis can help you to make great returns from the market and help to attain your financial goals in the long term.