Subject— Managerial Economics 

Type— Assignment 

Topic— Sensex‐Nifty 

Submitted to— Rachana Mem 

 

       

           

                  By— Rajat Gandhi                   FY BBA (Sem‐II)                   Roll No‐ 08 

Overview— 

Sensex  Defination  of Sensex  About Sensex  Last 5years data of Sensex 

  Nifty 

What is Nifty?(Defination)  Nifty and its meaning in Indian stock market  Other Information & Data about Nifty 

Difference between Sensex & Nifty 

 

         

Definition of 'Sensex' 

An  abbreviation  of  the  Bombay  Exchange  Sensitive  Index  (Sensex)  ‐  the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the  largest  and most  actively‐traded  stocks  on  the BSE.  Initially  compiled  in 1986, the Sensex is the oldest stock index in India 

Q.1 What is SENSEX?   

The SENSEX, short form of the BSE‐Sensitive Index, is a "Market Capitalization‐Weighted"  index of 30 stocks representing a sample of  large, well‐established and  financially  sound  companies.  It  is  the  oldest  index  in  India  and  has acquired a unique place in the collective consciousness of investors. The index is  widely  used  to  measure  the  performance  of  the  Indian stock markets. SENSEX  is  considered  to  be  the  pulse  of  the  Indian  stock  markets  as  it represents  the  underlying  universe  of listed stocks at  The  Stock  Exchange, Mumbai. 

 

 

 

Q.2 What are the objectives of SENSEX?  

The SENSEX  is  the benchmark  index of  the  Indian Capital Markets with wide acceptance  among individual investors,  institutional  investors,  foreign investors and fund managers. 

  

The objectives of the  index are: To measure market movements given  its  long history  and  its  wide  acceptance,  no  other  index  matches  the  SENSEX  in reflecting  market  movements  and  sentiments.  SENSEX  is  widely  used  to describe the mood in the Indian Stock markets.  

Q.3 What are the criteria for selection and review of scrip’s for the Sensex?  

A. Quantitative Criteria:

1. Market Capitalization. 

2. Liquidity 

3. Continuity 

4. Industry Representation 

5. Listed History 

B. Qualitative Criteria: 

⇒ In  the  opinion  of  the  Index  Committee,  the  company  should  have  an acceptable track record. 

Q.4 What is the beta of SENSEX scrip’s?  

Beta measures the sensitivity of a scrip movement relative to movement in the benchmark index i.e. SENSEX. A Beta of one means that for every change of 1% in index, the scrip moves by 1%. 

 

 

Q.5 How is SENSEX calculated?  

    SENSEX  is  calculated  using  a  "Market  Capitalization‐Weighted" methodology. As per this methodology, the level of index at any point of time reflects  the  total market  value  of  30  component  stocks  relative  to  a  base period. 

    The  calculation  of  SENSEX  involves  dividing  the  total  market capitalization  of  30  companies  in  the  Index  by  a  number  called  the  Index Divisor.  The Divisor  is  the  only  link  to  the  original  base  period  value  of  the SENSEX. It keeps the Index comparable over time and  is the adjustment point for  all  Index maintenance  adjustments.  During market  hours,  prices  of  the index  scrip’s,  at  which  latest  trades  are  executed,  are  used  by  the  trading system to calculate SENSEX every 15 seconds and disseminated in real time. 

Q.6  How  are  adjustments  for  Bonus,  Rights  and  newly issued Capital carried out in SENSEX?

    The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights  shares.  If  no  adjustments  were  made,  a  discontinuity  would  arise between the current value of the index and its previous value. 

Other Issues: 

Base Market Capitalization Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin‐offs etc. or when equity  is reduced  by  way  of  buy‐back  of  shares,  corporate  restructuring  etc.

Q.7 With what frequency is SENSEX calculation done? 

During market hours, prices of the index scrip’s, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time. 

 

Last 5 years data of Sensex.— 

   

Dec-10 20,509

Nov-10 19,521

Oct-10 20,355

Sep-10 20,069

Aug-10 17,971

July-10 17,868

June-10 17,700

May-10 16,944

Apr-10 17,558

Mar-10 17,527

Feb-10 16,429

Jan-10 16,357

Dec-11 15,455

Nov-11 16,805

Oct-11 17,705

Sep-11 16,453

Aug-11 16,676

July-11 18,197

June-11 18,845

May-11 18,503

Apr-11 19,135

Mar-11 19,445

Feb-11 17,823

Jan-11 18,327

Dec-08 9,647

Nov-08 9,093

Oct-08 9,788

Sep-08 12,860

Aug-08 14,565

July-08 14,356

June-08 13,461

May-08 16,415

Apr-08 17,287

Mar-08 15,644

Feb-08 17,579

Jan-08 17,649

Month Index

Nov-12 19340

Oct-12 18,505

Sep - 12 18,762

Aug.-12 17,380

July-12 17,236

June-12 17,233

May-12 16,218

Apr-12 17319

Mar-12 17,404

Feb-12 17,752

Jan-12 17,194

Dec-09 17,464

Nov-09 17,198

Oct-09 15,896

Sep-09 17,127

Aug-09 15,666

July-09 15,670

June-09 14,494

May-09 14,625

Apr-09 11,404

Mar-09 9,708

Jan-09 9,424

Sensex’s Movement from 2010‐2012.. in Graph 

⇒ This Graph is about 3 years data of Sensex. 

As per Graph we can saw that in 2010 Sensex perform on normal level(12000‐13000).

In the middle of 2010 ther was a big recesseion came  into Indian Stock Market after 2009. So Sensex fall with unsertaintity.

Prices

Date Open Close

2 Dec, 2012 19,342.83 19,476.00 1 Jan, 2012 15,534.67 17,193.55 30 Nov,2011 16,555.93 15,454.92 2 Jan, 2011 20,621.61 18,327.76 30 Nov,2010 19,529.99 20,509.093 Jan, 2010 17,473.45 16,357.96 30 Nov,2009 16,947.46 17,464.811 Jan, 2009 9,973.06 9,424.24 30 Nov, 2008 9,162.94 9,647.31 1 Jan, 2008 20,393.10 17,648.71

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Nifty Index Definition: S&P CNX Nifty is varied 50 Stock Index construction for 21 sectors of the economy. It is utilized for a variety of purposes like benchmarking fund portfolios, index based derivatives and index funds. Nifty Index is relating to NSE Stock Exchange, Sensex is for BSE Stock Exchange. Indian Index Services & Products limited(also known as as IISL) owns NIFTY. ISSL is a joint project of NSE & CRISIL. But CRISIL is a subsidiary of standard and Poor, which labeled as as S&P NIFTY or, S&P CNX NIFTY.

• The traded value due to the last six months of all Nifty stocks is around 44.89% of the traded value of all stocks on the NSE

• Nifty stocks express about 58.64% of the total market exploitation as on March 31, 2008.

• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2crore is 0.15%

• S&P CNX Nifty is professionally managed and is perfect for derivatives trading.

Nifty and its meaning in Indian stock market 

Nifty is a very common term of share market. Index of NSE (National stock exchange) is known as Nifty. It comprises of 50 shares or stocks or corporations that’s why it is sometimes known as Nifty 50. Nifty is an indicator of all major companies of NSE. Nifty 50 is used for a variety of purposes such as index funds, index based derivatives and benchmarking fund portfolios. It is professionally maintained for derivative trading. It is an index accounting for total of 21 sectors of the economy. Nifty 50 has got good reputation in the bull markets of 1970s. It is officially known as S&P CNX Nifty. Full form of S&P CNX Nifty is Standard & Poor’s CRISIL NSE Index 50. Nifty 50 stocks were credited by the Bull Market. Nifty is basically based on top 50 companies profit. Nifty 50 is based upon solid economic research.

Future contracts on National Stock Exchange of India are based on S&P CNX Nifty. From June 26, 2009, Nifty 50 is computed on the terminology called “Free-Float Terminology”. The free-float methodology is the more correct way to compute both the index as well as the weight of individual stocks in the index. Today Nifty is owned and operated by IISL. IISL is a global phenomenon where company calculates and maintains the index. IISL is being launched by joined venture of NSE and CRISIL to focus on Management of Index. IISL stands for India Index Services and Products Limited. IISl is India’s First specialized Company which focuses on INDEX as a core product. Nifty is created for those who are interested in trading and investing in Indian Equities. 

Considerations to be undertaken while working on Nifty50: 

Nifty 50 is based upon solid economic research. There are millions and trillions of calculations were expended to evolve the rules inside Nifty.

Correct size to use is 50.

Stocks Considered for Nifty50 must be liquid by the ‘impact cost’ criteria.

Largest 50 stocks that meet the criteria goes into the Index.

Examples: There are various examples of nifty 50 stocks – Ongc, Reliance, Infosys, LT to name few.

Characteristics:

Solid Earning Growth

Low P/E Ratio

Extremely Stable, Even for long duration of time

Constituents of Nifty: 

Companies included in Nifty50 are: ABB Ltd., ACC Ltd., Ambuja Cements Ltd., Axis bank Ltd., Bharat Heavy Electricals Ltd., Bharat Petroleum corporation Ltd., BhartiAirtel Ltd., Cairn India Ltd., Cipla Ltd., DLF Ltd., GAIL Ltd., Grasim Industries Ltd., HCL Technologies Ltd., HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco Industries ltd., Hindustan Unilever Ltd., Housing Development finance corporation Ltd., ITC Ltd., ICICI Bank Ltd., Idea Cellular Ltd., Infosys Technologies Ltd., Jindal steel & Power Ltd., Larsen and Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., National Aluminium Co. Ltd., Oil & Natural gas Co. Ltd., Power Grid Corporation Of India Ltd., Punjab National Bank, Ranbaxy Laboratories, Reliance Capital Ltd., Reliance Communcations Ltd., Reliance Industries Ltd., Reliance Infrastructure Ltd., Reliance Power Ltd., Siemens Ltd., SBI, Steel Authority Of India Ltd., SterliteIndustries, Sun Pharmaceutical Industries Ltd., Suzlon Energy Ltd., Tata Communications, Tata Consultancy Services, Tata Motors Ltd., Tata power Co. Ltd., Tata Steel Ltd., Unitech Ltd., Wipro Ltd.

Nifty 50 represents about 60% of the total Market capitalization of NSE. It is basically a diversified Index. It reflects overall market conditions accurately. Basic risk of Nifty 50 will be lower as compared to other Index portfolios.

 

Nifty Positional Chart     How to trade using Positional Chart  

 

 

 

 

Difference between sensex and  Nifty. 

The 'BSE Sensex' or 'Bombay Stock Exchange' is value-weighted index composed of 30 stocks and was started in January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply Nifty (NSE: ^NSEI), is the leading index for large companies on the National Stock Exchange of India. The Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product.