The Sensex started in 1986 at a value of just 100. Every point it has climbed since then tells the story of India's biggest companies growing over decades. Yet most beginners hear "Sensex is up 300 points" on the news without knowing what is being measured. This guide makes it simple.
What is a stock market index?
An index is a scoreboard for the market. Instead of tracking thousands of shares, an index follows a carefully chosen group of companies and turns their combined performance into a single number. If the number rises, the chosen companies as a group have become more valuable. If it falls, they have become less valuable.
What is the Sensex?
The Sensex is the index of the Bombay Stock Exchange (BSE). It tracks 30 large, well-established companies from different sectors. It began on 2 January 1986 with a base value of 100.
What is the Nifty?
The Nifty 50 is the index of the National Stock Exchange (NSE). It tracks 50 large companies, so it covers a wider group than the Sensex. Its base value is 1,000, set in 1995.
| Index | Exchange | Companies | Base value |
|---|---|---|---|
| Sensex | BSE | 30 | 100 (launched 1986) |
| Nifty 50 | NSE | 50 | 1,000 (1995) |
What does the base value mean?
The base value is the starting point. If an index started at 100 and now stands at 200, the group of companies it tracks is worth about twice as much as at the start. The number itself is not a price you can pay. It is only a way to measure change over time.
How to read "up 300 points"
Points alone can mislead. What matters is the percentage change.
If the Sensex is at 80,000 and it rises by 300 points, the gain is 300 รท 80,000 = 0.375%. That is a small move, even though "300 points" sounds large.
Why do beginners watch the index?
- It gives a quick picture of the overall mood of the market.
- It helps you compare your investments with the broader market.
- Index funds and ETFs let you invest in the whole index through a single product, instead of choosing companies yourself.
Why a rising index does not mean every share is rising
On any day, some shares in the index rise while others fall. The index shows only the combined result. Bigger companies also have more influence on the number than smaller ones.
The companies in an index do not stay the same forever. Over the years, firms that grow smaller are removed and new leaders are added. Today's Sensex is not made of the same 30 companies it began with in 1986.
Common beginner mistakes with indices
- Thinking the Sensex or Nifty is a share you can buy directly
- Judging the market by points instead of percentages
- Assuming your own shares will move exactly like the index
Where to go next
You now know the language of market news. Next, learn how the stock market works and how shares make money. Then see how to manage risk before you invest your first rupee.