Chapters in Market Foundations
Chapter 2 of 6 · 5 min read
Indices: Sensex, Nifty and what they track
How a basket of stocks becomes one number, and which index measures what.
An index tracks the combined performance of a basket of stocks, so you can read the market in one number. The Nifty 50 holds 50 large NSE companies; the Sensex holds 30 large BSE companies.
Most Indian indices are float-adjusted market-cap weighted: bigger companies, counting only freely tradable shares, move the index more. That is why a handful of heavyweights can swing the headline number.
Broad, sectoral and thematic indices
Beyond the headline indices there are others you will meet on the site:
- Broad: Nifty 500, Midcap 150, Smallcap 250
- Sectoral: Bank Nifty, Nifty IT, Nifty Pharma and more
- Global: S&P 500, Nasdaq, Nikkei, FTSE and other benchmarks
- Volatility: India VIX, the market's fear gauge
Why indices matter
Indices are the yardstick for fund performance, the base for futures and options, and a quick read on market mood. Comparing a stock or your portfolio to its benchmark tells you whether you added value or just rode the market.
Key takeaways
- Index = weighted basket of stocks; Nifty 50 (NSE) and Sensex (BSE) are the headline pair.
- Large weights dominate: a few stocks can move the whole index.
- Use a benchmark to judge whether your returns are skill or just market beta.
Put it into practice
Open the live page on Market Intelligence and see this concept on real data.
Keep learning
- Market cap: large, mid and small cap · Market Foundations
- Nifty P/E ratio: what it means · Fundamental Analysis
Education only, not investment advice. Updated 2026-10-09.