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Nifty Index & Sensex Are Calculated Daily

The Nifty 50 and Sensex are the two main stock market indices in India that represent the performance of the stock market. These indices are calculated daily using a formula based on market capitalization and free-float methodology.

🔹 1. Nifty 50 Calculation (NSE)

The Nifty 50 index is managed by the National Stock Exchange (NSE) and represents the performance of the top 50 stocks across various sectors.

1.1 Formula for Nifty 50 Calculation

Nifty 50 is calculated using the free-float market capitalization-weighted method:

NIFTY 50 Index=(∑(Stock Price×Number of Shares×Free Float Factor)Base Market Capitalization)×1000\text{NIFTY 50 Index} = \left( \frac{\sum (\text{Stock Price} \times \text{Number of Shares} \times \text{Free Float Factor})}{\text{Base Market Capitalization}} \right) \times 1000

✅ Where:

  • Free Float Market Cap = Market price of a stock × Number of shares available for trading (free float).
  • Base Market Capitalization = Market cap of the index at the base year (1995, set at ₹2.06 trillion).
  • Index Divisor = Adjusts the index value to maintain consistency when stocks are added/removed.

1.2 Example Calculation

Assume the total free-float market cap of the 50 stocks in the Nifty 50 is ₹150 trillion, and the base market cap is ₹2.06 trillion.

NIFTY 50=(1502.06)×1000=72,815.5\text{NIFTY 50} = \left( \frac{150}{2.06} \right) \times 1000 = 72,815.5

🔸 The Nifty index will be around 72,816 points.

🔹 2. Sensex Calculation (BSE)

The Sensex (BSE 30) is managed by the Bombay Stock Exchange (BSE) and represents 30 of the largest and most actively traded stocks in India.

2.1 Formula for Sensex Calculation

Sensex also follows the free-float market capitalization-weighted method:

Sensex=(∑(Stock Price×Shares Available for Trading)Base Market Capitalization)×100\text{Sensex} = \left( \frac{\sum (\text{Stock Price} \times \text{Shares Available for Trading})}{\text{Base Market Capitalization}} \right) \times 100

✅ Where:

  • Base Year = 1978-79, with a base value of 100 points.
  • Market Capitalization = Stock price × Number of outstanding shares.
  • Free Float Factor = Percentage of shares available for public trading.

2.2 Example Calculation

If the total free-float market cap of Sensex 30 stocks is ₹60 trillion and the base market cap is ₹250 billion:

Sensex=(600.25)×100=24,000\text{Sensex} = \left( \frac{60}{0.25} \right) \times 100 = 24,000

🔹 The Sensex index would be 24,000 points.

🔹 3. Factors Affecting Nifty & Sensex Daily Calculation

Several factors cause the indices to rise or fall daily:

  1. Stock Prices Movements – If major stocks in Nifty 50 or Sensex rise, the index value increases.
  2. Corporate Earnings – Higher profits lead to higher stock prices, boosting index values.
  3. Economic & Political Factors – Inflation, GDP growth, government policies, and global markets impact stock prices.
  4. Foreign Institutional Investors (FII) & Domestic Institutional Investors (DII) Activity – Large buying/selling affects the index.
  5. Global Market Trends – US, European, and Asian market performance affects Indian indices.
  6. Interest Rates & RBI Policies – Higher interest rates can slow market growth, while lower rates boost investments.

🔹 4. Key Differences Between Nifty & Sensex

Feature

Nifty 50 (NSE)

Sensex (BSE)

Number of Stocks

50

30

Base Year

1995

1978-79

Base Value

1000

100

Market Exchange

NSE

BSE

Sector Coverage

Broader (50 stocks from 13+ sectors)

Limited (30 stocks from key sectors)

Calculation Method

Free-Float Market Cap

Free-Float Market Cap

🔹 5. Why is Nifty 50 Different from Sensex?

Even though both indices reflect the stock market trends:

  1. Different Stocks – Nifty 50 has 50 stocks, while Sensex has 30, leading to different movements.
  2. Different Exchanges – Nifty tracks NSE-listed companies, and Sensex tracks BSE-listed companies.
  3. Weightage Differences – Some stocks have more influence in one index than in the other.

🔹 6. Conclusion

📌 Nifty 50 and Sensex are calculated daily using the free-float market capitalization method.
📌 Stock price movements, economic factors, and investor activities influence their values.
📌 Both indices help investors track market trends and make informed investment decisions.

💡 Understanding these calculations helps traders and investors make better financial decisions in the Indian stock market.

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