PosiStep 6: Indices and market moods: Nifty, Sensex, S&P 500, bull and bear
When the news says "the market fell today", it usually means an index fell. This PosiStep explains what an index is, the main ones in India and the US, and the words used for the market's moods.
What an index is
An index is a single number that tracks the prices of a chosen group of shares. When most of those shares rise, the index rises; when they fall, it falls. It is a quick way to see how a market, or part of it, is doing.
Most indices give bigger companies more weight, so a 2% move in a giant company moves the index more than a 2% move in a smaller one.
India: Nifty 50, Sensex and Nifty Bank
The Nifty 50 follows 50 of the largest companies on the NSE. The Sensex follows 30 of the largest companies on the BSE and is India's oldest widely followed index. Many companies, such as Infosys, are in both.
There are also sector indices. Nifty Bank (Bank Nifty) follows 14 of the largest Indian banks, so it shows how banking shares are doing.
US: S&P 500, Dow Jones 30 and Nasdaq 100
The S&P 500 follows about 500 of the largest US companies and is the most watched measure of the US market. The Dow Jones Industrial Average (Dow 30) follows 30 large, well-known companies and, unusually, is weighted by share price rather than company size. The Nasdaq 100 follows about 100 of the largest non-financial companies on Nasdaq, so it leans towards technology.
Apple is in all three.
Index points are not rupees
An index value, such as 25,000 for the Nifty, is measured in points, not money. What matters is the percentage change: a 250-point rise on 25,000 is 1%.
Because index levels are very different (the Sensex is much higher than the Nifty), comparing points between indices is meaningless; compare percentages instead.
Market moods: bull, bear and correction
A bull market is a long period of rising prices and optimism. A bear market is a long fall, often described as a drop of 20% or more from a recent high. A correction is a smaller fall, often around 10%, after a rise.
These moods can last months or years, and nobody can reliably predict when one ends. Both have happened many times in every market's history.
Where PositoAI fits
The Indices tab lists the companies in the Nifty 50, Sensex, Nifty Bank, S&P 100, S&P 500, Dow Jones 30, Nasdaq 100 and more, each ranked by Positivity Score. Senty is PositoAI's combined list of every company in the Sensex or the Nifty 50.
Key terms
- Index
- A single number tracking the prices of a chosen group of shares.
- Nifty 50 and Sensex
- India's main indices: 50 large NSE companies and 30 large BSE companies.
- S&P 500
- About 500 of the largest US companies; the main measure of the US market.
- Index points
- The unit of an index; compare percentage changes, not points.
- Bull and bear market
- A long rise (bull) or a long fall, often 20% or more (bear).
- Senty
- PositoAI's combined list of all Sensex and Nifty 50 companies.
Try it
A made-up index, the Sunrise 100, closes at 20,000 one day and at 20,300 the next. By what percentage did it rise?
The rise is 300 points. 300 ÷ 20,000 = 0.015, which is 1.5%. Always turn points into a percentage before judging a move.
See it live on PositoAI
Open the Indices tab and look at the Nifty 50 list. Find Infosys and note its rank within the index. Then switch to the US tab and open the Dow Jones 30 to find Apple.
What this does not tell you
An index shows the average mood of a group, not how any single company is doing. On a day the Nifty rises, many of its companies can still fall, and a strong market does not make every share a good one.
Quick quiz
What does a stock market index measure?
An index tracks the prices of a group of shares, giving one number for how that group is doing.
How many companies are in the Sensex?
The Sensex follows 30 large companies on the BSE. The Nifty 50 follows 50 on the NSE.
An index rises 250 points from 25,000. What is the change?
250 ÷ 25,000 = 0.01, which is 1%. Percentages, not points, show the size of a move.
What is a bear market?
A bear market is a long, deep fall. A bull market is the opposite: a long rise.
Which US index follows about 500 large companies?
The S&P 500 follows about 500 of the largest US companies and is the main measure of the US market.
Answer every question on this page correctly to complete this PosiStep.
🏅
PosiCourse is for education only. It does not recommend buying or selling any share. Examples with made-up numbers are not real companies. PositoAI is for research and education only and is not investment advice.