How are nifty and Sensex points calculated?

How are nifty and Sensex points calculated?

Sensex, or Sensitive Index, is India's oldest and most widely followed stock market index, representing the Bombay Stock Exchange (BSE). It comprises the top 30 liquid and diversified stocks across various sectors, and Nifty50, also known as Nifty, is India's leading stock market index, representing India's National Stock Exchange (NSE). It comprises the top 50 liquid and diversified stocks across 13 sectors.

Here's how their points are calculated:

Nifty (National Stock Exchange Fifty)

1. Selection of Stocks: Nifty comprises 50 stocks from 12 sectors, chosen based on liquidity, market capitalization, and trading frequency.

2. Market Capitalization-Weighted Index: Nifty is a market capitalization-weighted index, meaning the stocks with higher market capitalization have a greater influence on the index.

3. Free Float Market Capitalization: The index uses each stock's free float market capitalization, which is the market capitalization of the company's shares that are freely available for trading.

4. Calculation: The Nifty index value is calculated using the following formula:

Nifty Index Value = (Total Free Float Market Capitalization of all 50 stocks / Base Market Capitalization) x Base Index Value.

· The Base Market Capitalization is the total market capitalization of the 50 stocks in the index at the time of its launch. The Base Index Value is set at 1,000 [BASE YEAR – 1978/79].

Sensex (Sensitive Index)

1. Selection of Stocks: Sensex comprises 30 stocks from various sectors, chosen based on liquidity, market capitalization, and trading frequency.

2. Market Capitalization-Weighted Index: Like Nifty, Sensex is also a market capitalization-weighted index.

3. Free Float Market Capitalization: Sensex also uses the free float market capitalization of each stock.

4. Calculation: The Sensex index value is calculated using a similar formula:

Sensex Index Value = (Total Free Float Market Capitalization of all 30 stocks / Base Market Capitalization) x Base Index Value.

· The Base Market Capitalization is the total market capitalization of the 30 stocks in the index at the time of its launch. The Base Index Value is set at 100 [BASE YEAR-1995].

**In summary, both Nifty and Sensex are market capitalization-weighted indices that use the free float market capitalization of their constituent stocks to calculate their index values.

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