Indian Stock Market has a lot of Indices that are important for deriving the value of the market or the sectors. They are :
Out of all the above Indices the major ones that are in discussion very often are SENSEX, Nifty50 and Bank Nifty.
In India there are two stock market exchanges. They are named as BSE and NSE.
BSE – BOMBAY STOCK EXCHANGE.
NSE – NATIONAL STOCK EXCHANGE.
Usually all the shares are listed in both the stock exchanges. There is a very minimal price difference in both the exchanges for any particular share. Also there are chances that a share can be listed in BSE and not in NSE. Similarly there are chances that a share can be listed in NSE and not in BSE.
Nifty50 was started on April 21, 1996. Its full form is National Stock Exchange Fifty. Bank Nifty was started in 2000 and it is a sectoral specific Indices in the market.
Both the indices are benchmarks in the entire market.
Nifty is an indicator of the best 50 companies in accordance to all the parameters be it volume or market share or performance etc. It represents the best 50 stocks across all the sectors.
Bank Nifty is a benchmark for the 12 top banks in the country. It represents the stock market price of all those banks and imbibes a value of its own on basis of the percentage distribution among the banks. This helps the people to determine the value of the banking industry in the Indian market.
SENSEX is also known as S&P Bombay Stock Exchange Sensitive Index. It is an index containing the socks that are ranked top 30 in the market. It is an index created by BSE but isn’t available for trading in the market.
Nifty50 is a composition of the top 50 companies in the Stock Market of India. As per the latest criteria the company that is included in the Nifty50 index should be from the Nifty 100 index universe. Also the company should have a free float capitalisation of approximately 1.5 times in comparison to its market capitalisation of the smallest constituent in the respective index. Also the share should be trading at an average transaction cost of 0.50% or less in the past six months of historical data.
This rule has been updated by IISL (Index Services and Products Limited.). The new term for IISL is NSE indices Ltd.
The current structure of NIfty 50 gives the maximum weightage to Reliance Industries and HDFC bank. Out of all the sectors in the index the maximum weightage is assigned to Banking and Finance Sector. The weightage given is roughly around 26.8% of the entire index value. The second major contribution comes from the Technology sector. The weightage assigned is 21.06%. Then comes Oil and Gas at 14.6% and the rest is distributed among automotive, Cons Non-durable, Pharma,Telecom, Metals and mining, Engineering, Chemicals, Misc., Tobacco, Food and beverages, Cement and construction, Utilities and Conglomerates.
| SECTOR | WEIGHTAGE (%) |
| Banking and Finance | 26.76 |
| Technology | 21.06 |
| Oil and Gas | 14.68 |
| Auto | 5.88 |
| Cons Non-Durable | 4.88 |
| Pharma | 3.42 |
| Telecom | 2.84 |
| Metals and Mining | 2.77 |
| Engineering | 2.64 |
| Chemicals | 2.61 |
| Misc. | 2.42 |
| Tobacco | 2.37 |
| Food and beverages | 2.26 |
| Cement and construction | 2.16 |
| Utilities | 1.78 |
| Conglomerates | 1.39 |
Bank Nifty consists entirely of the stocks pertaining to the Banking/Finance sector. The stocks that are selected under bank nifty should have a market capitalisation rank of less than 500 in the Nifty universe list. Also the Company’s turnover rank in the same list should be less than 500. The frequency of trading should be at least 90% in the past six months for that particular company.
In Bank Nifty the major proportion is held by HDFC bank followed by ICICI bank, Kotak Bank and others. The weightage for ICICI bank is 20.05% and that for Kotak Mahindra bank is 15.88%. Axis bank comes up next with a percentage share of 15.35 and the list goes forward.
The list of stocks is as follows :
| BANK | WEIGHTAGE |
| HDFC Bank | 26.08% |
| ICICI Bank | 20.05% |
| Kotak Mahindra Bank | 15.88% |
| Axis Bank | 15.35% |
| SBI Bank | 10.54% |
| IndusInd Bank | 5.07% |
| Bandhan Bank | 2.72% |
| Federal Bank | 1.33% |
| RBL Bank | 1.03% |
| IDFC First Bank | 0.78% |
| Bank of Baroda | 0.74% |
| Punjab national Bank | 0.43% |
SENSEX is an index created by BSE but it is not available for trading in the market. However it is a useful tool for deciding the value of the Indian Market. The dominating sector here is the banking sector. Next in line comes technology and then comes oil and gas. The rankings assigned to all the sectors are more or less the same as NIFTY50 but the weightage assigned are quite different. Also it includes only 14 sectors whereas NIFTY50 includes 16 sectors in all.
| SECTOR | WEIGHTAGE |
| Banking and finance | 31.84% |
| Technology | 22.51% |
| Oil and gas | 14.90% |
| Cons Non durable | 5.81% |
| Auto | 4.66% |
| Telecom | 3.38% |
| Tobacco | 2.82% |
| Chemicals | 2.65% |
| Pharma | 2.38% |
| Utilities | 2.12% |
| Engineering | 2.01% |
| Food and Beverages | 1.79% |
| Cement or construction | 1.65% |
| Misc. | 1.41% |
NIfty50 and Bank Nifty both the indices are traded in the open market. Anyone with a DEMAT account can trade in these indices. These are available for buying and selling in fixed lot size. The FIxed lot size are as follows :
Each unit costs the same as the price running for the indices simultaneously. For example : If the price of NIFTY50 is 14300 then per unit cost is 14300 Rs. This means that the entire lot of NIFTY50 costs for 14300*75 = 1072500 Rs.
These indices expire every month and people have to indulge in fresh buying for next month to keep their positions intact. This means that if a person is holding NIFTY50 for January month, he has to sell the January futures and take a fresh position in February Futures and the cycle goes on.
Also these indices are traded in cash as well as F&O markets. The contracts for Bank Nifty and NIfty50 expire on the last Thursday of every month. In case Thursday is a holiday then the day before Thursday (WED or working day) is selected as the day for expiry. The expiry for Bank Nifty Options contracts is set for Thursday of every week.
There is another NIFTY index known as SGX nifty or Singapore nifty. The price of this index remains in parallel to the price of NIFTY50 index. Also SGX nifty can be traded in the open market and it is open for 16 hours a day. This means the trading is possible for 16 hours in case of SGX NIFTY index.
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