Why Sensex Has More Points than Nifty 50?

In this article, we will discuss

• Why Does Sensex Have More Points than Nifty?
• How Is Nifty 50 Calculated?
• How Is Sensex Calculated?
• Differences Between Sensex and Nifty
• Factors Affecting Sensex and Nifty
• Conclusion
• FAQs

The stock market in India is huge and has many stocks in it. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the largest exchanges where these stocks are listed. While Sensex is the flagship index of BSE, Nifty 50 is NSE’s top index. While both Nifty 50 and Sensex represent the country’s stock market, there are several differences between them. For instance, if you check these indices, you will notice one of them has substantially more points. Why is that? This blog will touch upon the important details and differences between these indices. Read on.

Why Does Sensex Have More Points than Nifty?

Often, traders/investors wonder whether Sensex is better than Nifty 50 or not. But why is there any difference? Nifty 50 comprises the top 50 stocks and is a broad index compared to Sensex which comprises the top 30 stocks only. In a bullish market, the top companies perform better and ultimately push the Sensex higher. If a trader compares the past data of these two indices, they’ll see that both indices have different base values used for their calculation. Moreover, he/she will see that Sensex is a much older index (started in 1986) compared to Nifty 50 (started in 1996) resulting in the former having more points. Let’s check the calculation of both indices to understand their differences.

How Is Nifty 50 Calculated?

The free-float market weighted capitalisation method is used to calculate Nifty 50. It is indicative of the total market value of all stocks in Nifty 50 in relation to its base period which is November 3 1995. The total value of shares of a company held by all investors including promoters is referred to as market capitalisation. Free-float market cap is the total market price of all shares which are available for public trading, i.e. those that are not held by the government or company owners. ‘Weighted method’ means that the component of each stock that is used to calculate the index is assigned a particular weightage based on the total value of their outstanding shares. Total market cap of each stock is calculated by multiplying it with a float factor, also known as Investible Weight Factor (IWF). Notably, it takes into consideration only those shares available for public trading. These formulas are used to calculate the value of Nifty 50: Market capitalisation = Current market price * outstanding shares Free-float market capitalisation = Market cap * IWF Index value = (Current market value/base market capital) * 1000 Note that the current market value is the weighted aggregate market cap of all companies on Nifty 50. The base market capital is the weighted aggregate market cap of all companies during Nifty 50's base period.

How Is Sensex Calculated?

Sensex is calculated by taking into account the free float market capitalisation of 30 companies and the base value of Sensex. The formula for free float market capitalisation is as follows: Free float market capitalisation = Market capitalisation * free float factor As we know the market value of a company is calculated as follows: Market capitalisation = Share price * Number of shares issued by a company First, one has to calculate the market capitalisation of 30 companies. Next, the free float market capitalisation of all the companies gets estimated. The results are added together to arrive at the total free-float capitalisation value. Now, let’s check how to calculate the value of Sensex: Sensex Value = (Total free-float market capitalisation/base market capitalisation) * base period index value Remember that Sensex's base value is 100 base points. Its base year refers to 1978 – 1979.

Differences Between Sensex and Nifty

The following table provides differences between Sensex and Nifty 50:

Criteria	Nifty 50	Sensex
Operated by	National Stock Exchange	Bombay Stock Exchange
Number of listed companies	50	30
Number of sectors	Nifty covers overall 24 industrial sectors	Sensex covers a total of 13 industrial sectors
Index calculation	Free-float calculation	Free-float calculation
Volume and liquidity	Higher	Lower
Base number	1000	100
Base period	November 3, 1995	1978 - 1979
Base capital	₹2.06 trillion	Not applicable

Factors Affecting Sensex and Nifty

The stock market of a country is considered to be a reliable indicator of the overall health of its economy. Important factors which affect the valuation of stocks of both indices are discussed below:

• Inflation 

It's defined as the rise in the average price of goods and services in an economy during a particular period. During periods of high inflation, people tend to invest less in stocks because usually, they don't have surplus funds for investments.

• Interest Rates 

An increase in the repo rate by RBI makes borrowing an expensive affair for Indians. To compensate for higher costs, companies lay off workers or cut back their spending. Considering that companies can’t borrow much in this situation, their earnings decrease. All of these factors add up and cause a plunge in the stock market.

• Global markets 

Global economic trends affect the Indian stock market in a major way. During a global recession, companies experience a plunge in revenues which has a negative impact on stock markets. Depreciation of the domestic currency can also lead to a bear market.

Conclusion

To sum up, the flagship index of NSE is Nifty 50 while the one for BSE is Sensex. The latter is perceived to be a better performer than Nifty. But the difference in value is because Sensex comprises stocks of the top 30 Indian companies and more time in the market. Do you wish to achieve the best financial performance? Get the new Samco app , a power-packed robust trading platform which will help you to ace the index with its advanced features.

FAQs

• Which is older—Sensex or Nifty? 

Sensex is older than Nifty 50 despite the latter having 50 companies. This gave it more time to accumulate a larger capital.

• How do Nifty and Sensex work? 

Nifty 50 comprises the top 50 stocks from the top 50 companies in the index in terms of market cap. On the other hand, Sensex comprises the top 30 stocks. The base index value of Nifty is 1000 whereas that of Sensex is 100.

• What criteria affect an index’s performance? 

The important criteria that affect an index’s performance are market interest rate, inflation rate, foreign and domestic institutional investments and currency fluctuations.