Most of us go through news daily and the ones who are not so financial literate come across a certain name which they are not sure why even exists. I was a frequent follower of news but when it comes to financial literacy, I was not having any clue about any financial term nor any conceptual knowledge.
Today we will see what is Sensex or Nifty50?.
Sensex and Nifty 50 are Indian stock market indices and are used to study the trend of the stock market. These indices give us similar significance as a weighing device and help everyone to understand the current situation of the stock market. Let us take an example of different types of markets like wholesale market and consumer market. They also have indices like consumer inflation index, wholesale inflation index. Whenever we analyze indices gives a pattern over the time then they could reveal a lot of insights. They also help one to analyze the market situation at a time and take some actions against it. The Same action could be taken by investors as our government periodically monitors the inflation rate and change monetary policy accordingly.
Sensex is the index managed by BSE which contains around 30 companies whereas Nifty50 is the index managed by NSE which contains around 50 companies. BSE and NSE periodically review the list of companies in the index and make changes accordingly.
Now the question arises what conclusion could be drawn based on these indices. As I told an index gives a broader picture of a trend in the stock market. If an index is going up then we can note following observations
- Investors are optimistic about the growth of the companies.
- There is more demand in the market and investors are investing more of their money in stock market.
- As investors being optimistic about the companies directly shows they are optimistic about country’s growth and its GDP.
Read: Why stock markets exist?
The same principle could be applied when an index is going down.
I hope now it will give you good picture what Sensex and Nifty stand for. We will take more such small concepts on our journey to improve financial literacy.
Thanks for reading.