Date post: | 12-Sep-2014 |
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Economy & Finance |
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Subject— Managerial Economics
Type— Assignment
Topic— Sensex‐Nifty
Submitted to— Rachana Mem
By— Rajat Gandhi FY BBA (Sem‐II) Roll No‐ 08
Overview—
Sensex Defination of Sensex About Sensex Last 5years data of Sensex
Nifty
What is Nifty?(Defination) Nifty and its meaning in Indian stock market Other Information & Data about Nifty
Difference between Sensex & Nifty
Definition of 'Sensex'
An abbreviation of the Bombay Exchange Sensitive Index (Sensex) ‐ the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively‐traded stocks on the BSE. Initially compiled in 1986, the Sensex is the oldest stock index in India
Q.1 What is SENSEX?
The SENSEX, short form of the BSE‐Sensitive Index, is a "Market Capitalization‐Weighted" index of 30 stocks representing a sample of large, well‐established and financially sound companies. It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. SENSEX is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Stock Exchange, Mumbai.
Q.2 What are the objectives of SENSEX?
The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers.
The objectives of the index are: To measure market movements given its long history and its wide acceptance, no other index matches the SENSEX in reflecting market movements and sentiments. SENSEX is widely used to describe the mood in the Indian Stock markets.
Q.3 What are the criteria for selection and review of scrip’s for the Sensex?
A. Quantitative Criteria:
1. Market Capitalization.
2. Liquidity
3. Continuity
4. Industry Representation
5. Listed History
B. Qualitative Criteria:
⇒ In the opinion of the Index Committee, the company should have an acceptable track record.
Q.4 What is the beta of SENSEX scrip’s?
Beta measures the sensitivity of a scrip movement relative to movement in the benchmark index i.e. SENSEX. A Beta of one means that for every change of 1% in index, the scrip moves by 1%.
Q.5 How is SENSEX calculated?
SENSEX is calculated using a "Market Capitalization‐Weighted" methodology. As per this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period.
The calculation of SENSEX involves dividing the total market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index maintenance adjustments. During market hours, prices of the index scrip’s, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.
Q.6 How are adjustments for Bonus, Rights and newly issued Capital carried out in SENSEX?
The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value.
Other Issues:
Base Market Capitalization Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin‐offs etc. or when equity is reduced by way of buy‐back of shares, corporate restructuring etc.
Q.7 With what frequency is SENSEX calculation done?
During market hours, prices of the index scrip’s, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.
Last 5 years data of Sensex.—
Dec-10 20,509
Nov-10 19,521
Oct-10 20,355
Sep-10 20,069
Aug-10 17,971
July-10 17,868
June-10 17,700
May-10 16,944
Apr-10 17,558
Mar-10 17,527
Feb-10 16,429
Jan-10 16,357
Dec-11 15,455
Nov-11 16,805
Oct-11 17,705
Sep-11 16,453
Aug-11 16,676
July-11 18,197
June-11 18,845
May-11 18,503
Apr-11 19,135
Mar-11 19,445
Feb-11 17,823
Jan-11 18,327
Dec-08 9,647
Nov-08 9,093
Oct-08 9,788
Sep-08 12,860
Aug-08 14,565
July-08 14,356
June-08 13,461
May-08 16,415
Apr-08 17,287
Mar-08 15,644
Feb-08 17,579
Jan-08 17,649
Month Index
Nov-12 19340
Oct-12 18,505
Sep - 12 18,762
Aug.-12 17,380
July-12 17,236
June-12 17,233
May-12 16,218
Apr-12 17319
Mar-12 17,404
Feb-12 17,752
Jan-12 17,194
Dec-09 17,464
Nov-09 17,198
Oct-09 15,896
Sep-09 17,127
Aug-09 15,666
July-09 15,670
June-09 14,494
May-09 14,625
Apr-09 11,404
Mar-09 9,708
Jan-09 9,424
Sensex’s Movement from 2010‐2012.. in Graph
⇒ This Graph is about 3 years data of Sensex.
As per Graph we can saw that in 2010 Sensex perform on normal level(12000‐13000).
In the middle of 2010 ther was a big recesseion came into Indian Stock Market after 2009. So Sensex fall with unsertaintity.
Prices
Date Open Close
2 Dec, 2012 19,342.83 19,476.00 1 Jan, 2012 15,534.67 17,193.55 30 Nov,2011 16,555.93 15,454.92 2 Jan, 2011 20,621.61 18,327.76 30 Nov,2010 19,529.99 20,509.093 Jan, 2010 17,473.45 16,357.96 30 Nov,2009 16,947.46 17,464.811 Jan, 2009 9,973.06 9,424.24 30 Nov, 2008 9,162.94 9,647.31 1 Jan, 2008 20,393.10 17,648.71
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Nifty Index Definition: S&P CNX Nifty is varied 50 Stock Index construction for 21 sectors of the economy. It is utilized for a variety of purposes like benchmarking fund portfolios, index based derivatives and index funds. Nifty Index is relating to NSE Stock Exchange, Sensex is for BSE Stock Exchange. Indian Index Services & Products limited(also known as as IISL) owns NIFTY. ISSL is a joint project of NSE & CRISIL. But CRISIL is a subsidiary of standard and Poor, which labeled as as S&P NIFTY or, S&P CNX NIFTY.
• The traded value due to the last six months of all Nifty stocks is around 44.89% of the traded value of all stocks on the NSE
• Nifty stocks express about 58.64% of the total market exploitation as on March 31, 2008.
• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2crore is 0.15%
• S&P CNX Nifty is professionally managed and is perfect for derivatives trading.
Nifty and its meaning in Indian stock market
Nifty is a very common term of share market. Index of NSE (National stock exchange) is known as Nifty. It comprises of 50 shares or stocks or corporations that’s why it is sometimes known as Nifty 50. Nifty is an indicator of all major companies of NSE. Nifty 50 is used for a variety of purposes such as index funds, index based derivatives and benchmarking fund portfolios. It is professionally maintained for derivative trading. It is an index accounting for total of 21 sectors of the economy. Nifty 50 has got good reputation in the bull markets of 1970s. It is officially known as S&P CNX Nifty. Full form of S&P CNX Nifty is Standard & Poor’s CRISIL NSE Index 50. Nifty 50 stocks were credited by the Bull Market. Nifty is basically based on top 50 companies profit. Nifty 50 is based upon solid economic research.
Future contracts on National Stock Exchange of India are based on S&P CNX Nifty. From June 26, 2009, Nifty 50 is computed on the terminology called “Free-Float Terminology”. The free-float methodology is the more correct way to compute both the index as well as the weight of individual stocks in the index. Today Nifty is owned and operated by IISL. IISL is a global phenomenon where company calculates and maintains the index. IISL is being launched by joined venture of NSE and CRISIL to focus on Management of Index. IISL stands for India Index Services and Products Limited. IISl is India’s First specialized Company which focuses on INDEX as a core product. Nifty is created for those who are interested in trading and investing in Indian Equities.
Considerations to be undertaken while working on Nifty50:
Nifty 50 is based upon solid economic research. There are millions and trillions of calculations were expended to evolve the rules inside Nifty.
Correct size to use is 50.
Stocks Considered for Nifty50 must be liquid by the ‘impact cost’ criteria.
Largest 50 stocks that meet the criteria goes into the Index.
Examples: There are various examples of nifty 50 stocks – Ongc, Reliance, Infosys, LT to name few.
Characteristics:
Solid Earning Growth
Low P/E Ratio
Extremely Stable, Even for long duration of time
Constituents of Nifty:
Companies included in Nifty50 are: ABB Ltd., ACC Ltd., Ambuja Cements Ltd., Axis bank Ltd., Bharat Heavy Electricals Ltd., Bharat Petroleum corporation Ltd., BhartiAirtel Ltd., Cairn India Ltd., Cipla Ltd., DLF Ltd., GAIL Ltd., Grasim Industries Ltd., HCL Technologies Ltd., HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco Industries ltd., Hindustan Unilever Ltd., Housing Development finance corporation Ltd., ITC Ltd., ICICI Bank Ltd., Idea Cellular Ltd., Infosys Technologies Ltd., Jindal steel & Power Ltd., Larsen and Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., National Aluminium Co. Ltd., Oil & Natural gas Co. Ltd., Power Grid Corporation Of India Ltd., Punjab National Bank, Ranbaxy Laboratories, Reliance Capital Ltd., Reliance Communcations Ltd., Reliance Industries Ltd., Reliance Infrastructure Ltd., Reliance Power Ltd., Siemens Ltd., SBI, Steel Authority Of India Ltd., SterliteIndustries, Sun Pharmaceutical Industries Ltd., Suzlon Energy Ltd., Tata Communications, Tata Consultancy Services, Tata Motors Ltd., Tata power Co. Ltd., Tata Steel Ltd., Unitech Ltd., Wipro Ltd.
Nifty 50 represents about 60% of the total Market capitalization of NSE. It is basically a diversified Index. It reflects overall market conditions accurately. Basic risk of Nifty 50 will be lower as compared to other Index portfolios.
Nifty Positional Chart How to trade using Positional Chart
Difference between sensex and Nifty.
The 'BSE Sensex' or 'Bombay Stock Exchange' is value-weighted index composed of 30 stocks and was started in January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply Nifty (NSE: ^NSEI), is the leading index for large companies on the National Stock Exchange of India. The Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product.