What is Nifty & Bank Nifty

The Nifty and Bank Nifty indices represent the stock market performance in India. They’re calculated using a weighted average of the stock prices of certain companies.

Nifty 50:

The Nifty is a stock market index that represents the performance of the top 50 companies listed on the National Stock Exchange (NSE) in India.

These 50 companies are chosen based on certain criteria like market value (market capitalization) and the liquidity.

Imagine you have a basket, and each company’s stock is like a fruit. The bigger and juicier fruits (companies with higher market value) have a larger share in the basket. Smaller fruits (companies with lower market value) have a smaller share.

Now, let’s say you have 50 fruits in the basket. The juicier and more popular fruits (companies) will have a bigger impact on how heavy the basket is.

If the big fruits get juicier (their stock prices go up), the basket becomes heavier (index value increases). If the big fruits lose juice (stock prices go down), the basket becomes lighter (index value decreases).

Bank Nifty:

The Bank Nifty, on the other hand, is specific to the banking sector only. It represents the performance of major banking stocks in India.

The process of calculating Bank Nifty is quite similar to Nifty. You have a basket, but this time, it’s filled with the stocks of major banking companies. The bigger and more influential the bank (based on the number of shares and its value), the larger share it has in the basket.

So, when you see the Nifty or Bank Nifty index value go up or down, it’s like seeing how heavy or light the basket of fruits (stocks) has become. It gives us an idea of how well these important companies are doing in the stock market.

Based on the performance of these indices one can analyse the economic condition of the country.