What is Nifty and Sensex?

Ladies, have you ever felt lost when conversations about the share market come up? Terms like Nifty 50 and Sensex might sound intimidating, but they’re not as complex as they seem. Understanding these concepts is like unlocking a new superpower for managing your finances & having conversations with your friends & family. After all, we women are amazing multitaskers, and learning about investments is a life skill every woman should know!

Let’s decode these terms and understand the meaning of Nifty & Sensex, the difference between Sensex and Nifty, and the basic understanding of the same.

What is Nifty?

The Nifty 50 is a stock market index that represents the top 50 companies from diverse sectors listed on the NSE (National Stock Exchange). This index was launched in 1996. On NSE there are 2,379 companies listed out of which the top 50 companies are listed on Nifty 50. Think of it as a basket filled with India’s leading companies. These companies are chosen based on their performance and size, and together they give us a snapshot of how the stock market is doing. The stocks are chosen based on a number of factors, including market capitalization, liquidity, and sector representation.

The 29-year CAGR (1996-2024) of Nifty 50 is 11.93%, while the absolute return is 2529% as of 30th December 2024.

What is Sensex?

Sensex, on the other hand, represents the top 30 companies listed on the BSE (Bombay Stock Exchange) from diverse sectors. This index was launched in 1986. It’s like a smaller basket of well-performing companies. On BSE there are 5,505 companies listed out of which the top 30 companies are listed on Sensex. 

The 39-year CAGR (1986-2024) of Sensex is 13.69%, while the absolute return is 14820% as of 30th December 2024.

Both Nifty and Sensex show the health of the equity market. These are 2 prominent Indices of the equity market.

How Indian Equity Markets Have Grown as Compared to FDs Over The Years?

Equity markets go through ups and downs which is known as market volatility but as you can see in the below chart it has delivered higher returns even with volatility. But on the other hand FDs fixed interest is not even able to beat inflation. Volatility is the nature of the market so, equity markets expect patience and perseverance from investors if they want to earn inflation-beating returns and create wealth.

The below chart depicts the return comparison year on year basis between FD, Nifty 50 & Sensex:

The 11-year average interest rate for FD is 6.79%, and for Nifty 50 & Sensex 11 years average rate of return is 13.30% and 13.11% respectively.

As you can see in the above graph Nifty 50 & Sensex almost moved in the same direction, however, FD was not able to beat the inflation rate which is the biggest hurdle to creating wealth. So, if you wish to build wealth then you should diversify your portfolio and should have an equity component in your investment portfolio.

Why Should Women Know About Nifty and Sensex?

Understanding Nifty and Sensex is essential because they act as benchmarks for the Indian equity market. And if you are investing in equity then these 2 indices give you an overall view of how equity markets are performing.

How to Invest in Nifty 50 and Sensex?

You cannot invest directly in Nifty 50 or Sensex, but you can invest through, ETFs i.e. Exchanged Traded Funds, & Index Funds which are a type of investment that tracks a particular market index. It aims to replicate the performance of the index as much as possible. ETFs are traded on the stock exchange and can be bought or sold at market prices, so, to invest in ETFs you need a Demat account. And If you want to invest in index funds then you don’t need a Demat account.

How Actively Managed Mutual Funds Can Be a Smart Choice For a Women Investor?

Actively managed equity mutual funds are designed to beat the market by carefully selecting stocks/shares that can perform better than the index. While ETFs & index funds simply mirror the index, actively managed mutual funds aim to deliver higher returns and generate alpha (Extra returns which you get over market returns is known as alpha). For women juggling multiple roles, mutual funds are a great way to let your money work smarter while getting better returns & growing your money.

You can check out the Lxme app – investment for women which offers expert-curated equity mutual funds that are well-researched and curated by experts.

Lastly, Nifty and Sensex aren’t as overwhelming as they sound. They’re indices to help us understand the stock market better. As you have understood Sensex and Nifty meaning which are 2 prominent indices of the Indian equity market that show the overall equity market performance, now it’s your time to invest in equity mutual funds so, that you can grow wealth over a period of time.

Remember, financial independence is not just about earning money; it’s about making your money work for you. So, why wait? Start your journey today and take charge of your financial future. Because when women invest, the world prospers!

*Mutual funds are subject to market risks, read all scheme-related documents carefully.

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Further Read,

• Why Hybrid Funds Are Smart Choice for Women Investors? 
• 10 Best Low-Risk Investments of All Time
• What are Contactless Credit Cards and How does it work?