India has two major stock exchanges – National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Each of these two stock exchanges have thousands of listed companies. When the market is open, the stock prices of these companies rise and fall.
For example, the price of Reliance Industries might fall by 2%, TCS might rise by one percent and HDFC Bank might fall by 5%.
Since individual companies can perform differently each day, it’s difficult to collectively tell whether the market has performed well or not.
To solve this problem, we have indices like NIFTY 50 and Sensex – which indicates the direction in which the market is moving.
NIFTY 50 is the major index of the National Stock Exchange. It consists of 50 large and well-established companies.
Sensex is the major index of the Bombay Stock Exchange. It consists of 30 leading companies in the country.
Sensex is the oldest index in India. It was established in the year 1978-79, with a base value (starting value) of 100.
NIFTY 50 was introduced much later. The base year is 1995 and the base value was 1000.
Even though Nifty has 50 companies and Sensex has 30, their movement is almost identical because some of the biggest companies in India – those with highest market capitalisation – are part of both Nifty and Sensex.