Stock markets for beginners: Watch and learn

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On what basis do analysts predict the direction and performance of stock market? By referring to the market index. All the major stock exchanges across the globe have indices that indicate the market behaviour and corresponding investor sentiments.

An upwards or downward movement depicted in these indices represent a bullish or bearish market trend, respectively. In India, Nifty and Sensex are two important stock indices which help to understant the undercurrent and momentum in the share market.

Sensex, or sensitive index, is the oldest market index for equities. It has shares from top 30 companies listed in the BSE. Meanwhile, Nifty 50, or National Fifty, includes top 50 companies listed on the National Stock Exchange (NSE) and operated by India Index Services Products Ltd. (IISL).

Both Sensex and Nifty exemplify the strength of Indian stock market and calculated almost by the same method. However, there are minor differences between the two. For example, the base value of Sensex is 10o while the value of Nifty is 1000.

Now, even if your shares aren’t listed on either of the two indices, their overall performance will hint on how the subsequent shares will perform.

Any economic change can trigger the performance of both the Sensex and Nifty. This means a booming economy will result in a bullish trend and the indices will move upward. Macro-economic factors like budget, export, import, banking, etc. have an equal impact on the indices.

Health emergencies like Covid-19 pandemic have a direct impact on the national economy. This, in turn, influences the Sensex and Nifty50 as well. Remember the huge market crash in March last year? That’s how sensitive the market is. Sensex and Nifty50 help to quantify this movement and make it easier for the investor to put/pull money at the right time.