What Is Sensex And Nifty? How Are They Calculated?

Last Updated: 17 Sep 2025

Sensex and Nifty are two large-cap indexes associated with two different stock exchanges of the country namely Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). These are just statistical aggregate on how a change in the stock market can be measured. This blog outlines how Sensex and Nifty are calculated.

What is Sensex?

Sensitive Index or Sensex is the stock market app index indicator for the BSE. It is also sometimes referred to as BSE Sensex. It was first published in 1986 and is based on the market-weighted stock index of 30 companies based on the financial performance. The large, established companies that represent various industrial sectors are a part of this.

How is Sensex calculated?

The calculation of Sensex is done by a Free-Float method that came into existence from September 1, 2003. The level of Sensex is a direct indication of the performance of 30 stocks in the market. The free-float method takes into account the proportion of the shares that can be readily traded in the market. This does not include the ones held by various shareholders and promoters or other locked-in shares not available in the market.

What is Nifty

National Stock Exchange Fifty or Nifty is the market indicator of NSE. It ideally is a collection of 50 stocks but presently has 51 listed in it. It is also referred to as Nifty 50 and CNX Nifty by some as it is owned and managed by India Index Services and Products Ltd. (IISL).

Nifty Calculation Method

Nifty is also calculated through the free-float market capitalisation weighted method. Just like the Sensex, Nifty also follows a mathematical formula to know the market capitalisation. It multiples the Equity capital by a price to derive the market capitalisation.

To determine the Free-float market capitalisation, equity capital is multiplied by a price, which is further multiplied by IWF, which is the factor for determining the number of shares available for trading freely in the market.

The Index is determined on a daily basis by taking into consideration the current market value divided by the base market capital and then multiplied by the Base Index Value of 1000.

Process of Calculation of Sensex Index

The index is calculated using the free-float market capitalisation method. In this Sensex calculation method, only the shares available for public trading are considered, not the total shares of the company. The market value of each company is multiplied by its free-float factor. These values are then added together and compared to a base year value of 1978–79. This process shows how the overall market is moving at any given time.

Conclusion

Both Sensex and Nifty are stock market indices used to determine the value and strength of the stock market. Since Nifty is more diversified and has more stocks listed as compared to BSE, more trading is done on it. However, in reality, both target the large-cap stocks and performance over the years has turned out to be similar.

Frequently Asked Questions

1. Why are Sensex and Nifty important?

They act as barometers of the Indian stock market. If Sensex and Nifty rise, it shows the market is doing well, and if they fall, it signals weakness.

2. How many companies are included in Sensex and Nifty?

Sensex includes 30 top companies listed on BSE. Nifty includes 50 leading companies listed on NSE.

3. Are Sensex and Nifty the same?

No. Both are stock market indices but belong to different exchanges. Sensex is for BSE, while Nifty is for NSE.

4. Can investors directly invest in the Sensex or the Nifty?

No, but they can invest in index funds or ETFs that track the performance of the Sensex or Nifty.