What is the Difference between Nifty and Sensex?

There are thousands of companies listed on stock exchange. It will be very difficult to track every stock that trades on an exchange. Therefore a small sample of the companies in the market is taken which is a representation of the whole market. This small sample is called an index. It is a statistical measure of the change in a portfolio of companies stocks which represent a portion of the overall market.

Difference between Nifty and Sensex

Sensex and Nifty are both large-cap index and from different exchanges that is BSE and NSE respectively.  They are the indicators of market behavior and give an idea whether most shares have gone up or down. Usually, it is used as a benchmark for portfolio performance. The index gives the comparison of returns on investment with other asset class like real estate, gold, bond, or debt.

The index committee which is made up of academicians, financial journalists, mutual fund managers, and independent governing board members choose the ‘sample’ companies that are listed. Sometimes there is change in these listed companies and is notified.

Nifty

National Stock Exchange Fifty is in short called Nifty50. It is a stock market index of National Stock Exchange and called Nifty50. NSE is located at Bandra Kurla Complex, Mumbai. It is a market-weighted stock index of 50 (previously 51) companies that are selected on basis of performance and financial soundness. These companies represent 24 industrial sectors.

Highlights

  • It came into existence in 1996 the base year 1995 = 1000
  • Previously it was named CNX Nifty, but from Sept. 2015 it was renamed Nifty50.
  • It is the biggest capital market of the country and one of the fastest.
  • It introduced the fully automatic electronic trading system in the country.
  • Depository services are offered through NSDL (National Securities Depository Limited).
  • Nifty is calculated using the free-float market capitalization weighted method. 50 constituent stocks (51 previously) are chosen.

Sensex

Let us start with Sensex. Full form of Sensex is “Sensitive Index”. It is a stock market index of Bombay Stock Exchange and called BSE Sensex. BSE is located at Dalal Street, Mumbai. It is a market-weighted stock index of 30 companies that are selected on basis of performance and financial soundness. They are large companies which are well established financially. These companies represent 13 industrial sectors.

Highlights

  • It came into existence in 1986, the base year 1978-79 = 100.
  • It is older than Nifty. It is the oldest financial market in the country.
  • Depository services are offered through CDSL (Central Depository Services Limited).
  • Free-float market capitalization method is used for calculating Sensex. 30 constituent stocks are chosen.
  • Free float stands for the stocks that are there for trading. Lock-in shares are not considered as free float.
  • Market capitalization is the combined worth of all stocks of different companies that are within the stock exchange.

If you are interested in trading shares and not sure which shares to sell/buy you can contact us through phone us or email us. We provide trading tips after doing fundamental and technical analysis of the company and changes in government rules and/or policies. There are many services that we offer in categories like equity, derivative and MCX. You can also avail our two days free trial by filling up the fields and submitting it.

Why do futures traders fail?

Futures are the financial contracts whereby the buyer is obliged to purchase an asset or the seller is obliged to sell an asset which can be a financial instrument or physical commodity. The transaction takes place at a predetermined future date and value. It is mentioned in the contract the quantity and quality of the asset in question. To facilitate trading on the future the assets are standardized. Some future contracts call for physical delivery of the asset while others are settled in cash.

futures traders

It is seen, many futures traders make a decent profit when they start trading initially and latter encounter endless string of losses. Sometimes their losses are so huge that they eat away their trading capital too. There are common pitfalls that you must know so you can avoid them.

You can decrease your loss and improve your odds for successes. We have discussed some common futures trading mistakes here that beginners usually make.

Not sticking to the strategy once it is made

Most of the traders have a strategy in place which helps them select trades as to keep loss minimum. When they are implementing their strategies and it starts showing fruits many traders start deviating or altogether  abandon the strategy and jump to some another one. By doing so they let emotions (greed, overconfidence) to creep in which ultimately leads to losses.

Not using buy/sell limits

Like all other trading activities, futures trading also involve a certain degree of risk and it is important to protect yourself. There are a few ways one can protect himself/herself. You can limit your buy or sell to a certain value so that your loss is in your comfort level. In other words, in the eventuality of loss you can withstand it financially. You can use hedging strategies like buying puts. The steps that you take to protect yourself will help keep loss to a minimum and it will maximize your profits.

Not concentrating properly

Futures trading require your full attention to read and evaluate markets effectively. There may be some distractions which are unavoidable and you can cut down on other few distractions, fewer the better.

Not open to new ideas

As everything change with time, so does the stock market. You may think of yourself as a great trader but there is always a new idea cropping up that can help you improve upon your results. Many a time traders think that they know a lot of things and there is nothing left for them to learn. As market condition change these types of ‘stubborn’ traders are left behind and they get only loss. If you welcome changes with open arms and embrace it in the way you trade, you will be able to change with the markets and profit consistently.

Alliance Research, under its derivative segment, provides intraday stock futures trading tips to traders. Our research team works for identifying movements in the futures market on an intraday basis. We provide recommendations that enable traders to earn maximum returns. Even help them reduce the risk. As per market movement, we provide 2 – 3 intraday future market calls and update you on important news and information.

How to find and invest in blue-chip stocks for long-term?

The stocks that are of high quality, the companies which are established, big, renowned, and are in the market for decades are called blue chip stocks.  Blue chip stocks got their name from the poker game. In a poker game, there are three colored chips white chips (valued at $1), red chips (valued at $5), and blue chips (valued at $10). Blue chip is an analogy that is used for identifying the “most valued stock”.

blue-chip stocks

What factors make a stock/company “blue chip”?

There is a combination of factors that transform a stock into a blue-chip stock means the stocks

  • Which has the largest market share
  • Is highly valued.
  • Has strong financial standing.
  • Pays regular and high dividend.
  • The company is large and established one.
  • Strong and known brand name.
  • Which has high weight-age in main stock indices etc.

Blue chip companies have the largest market share

Every company operates in a specific sector or industry and there can be many companies operating in similar sector/industry. There are companies that operate in several sectors but each company has a core operating sector. When we say a large market share, it means a large market share within that sector or industry. Large market share can be identified by the sales turnover of the company within that sector. You can also look for market capitalization of the company.

Why one should invest in blue-chip stocks/companies?

It is noted that first choice people make for their long term investment is for the blue-chip company. It is because the returns generated by blue-chip shares/companies are more assured in the long term. The reason being they yield consistent dividends, their future growth is more certain and during difficult times their stock price is more or less stable.

Investors like blue-chip stocks because they are consistent and high dividend yielding stock. Since these blue chip companies have a dominant market position and strong fundamentals which gives them the pricing power. Even in the bad times, their stock value does fall with the indices, but the price falling is slower, and recovery is faster.

How to identify blue chip stocks?

Apart from largest market share and highly valued in the market, there are few other factors one should look into are a strong balance sheet, highly profitable, high dividend payouts, and good investment credit ratings. More or less they are monopoly players in their segment.

All businesses are risky and have up and down cycle. What is blue chip today may not continue for a lifetime, but the probability of risk (being non-blue chip) is less for a decade or so.  So it is better that once in a while keep on checking their credit risk, in case it is downgraded there will be a bad impact on its market price and so on your returns.

Companies that are blue chip today

Here is a list of few companies that are blue chip today (as on writing this article) taking into account few factors like high absolute returns since last three years, high market capitalization, high dividend yield, credit rating, and low beta. They are TCS, Hindustan Zinc, Reliance Industries, ONGC, SBI, Hindustan Unilever, Coal India, Infosys, and GAIL (India) etc.

In case you want to know blue chip stocks in particular industry/sector which you feel will be a future growing sector you can contact us and we will be glad to help you. You can also fill the free trial form available on our site and submit it.

Happy investing in blue chip companies . . . . . .

Why is research necessary while purchasing shares?

A stock market is a place where are a number of people who have made a lot of money, and also there are people who have lost all their money. The difference is that few researched and then entered the stock market and other few just jumped in because their neighbor, friend or relative had made a lot of money. At the end of the day, without proper research, you are bound to face the consequences.

Share trading tips

Why should one research before buying/selling stocks?

If you are an investor it helps you find details before you invest in any security. Fundamental research is to analyze the stock whereas technical research is to value the stock on different parameters.

By research only you can make some assumptions about the value of stock and get a rough idea of the future performance of the stock. Research helps you to ensure that you are making the right investment, at the right price and at the right time so as to get maximum returns. It is your hard earned money and so you must have a reasonable knowledge of where and what you are investing in.

  1. Fundamental research

Fundamental research involves analyzing the financial statements, unique position in the business, competitive advantage it has over its peers and quality of management etc. It is evaluating securities depending upon the future growth prospects and attractiveness of the business.

For fundamental research one should look for

  • Industry growth of the company you are about to invest in.
  • Competitive advantage the company enjoys and ability to gain more market share over its peers.
  • Revenue and earnings growth company attained over the last few years.
  • Quality and capabilities of management board members.
  • Financials and valuations ratios like P/E ratio, margins, return ratios, etc.

2. Technical research

It is the study of the past price movements to approximately predict the future price trends. It helps in identifying the beginning of a sharp rise or fall in the share prices.

There are various charts used by technical analyst to draw his conclusion. They are candlestick chart, bar chart, and line chart.

How is technical analysis advantageous?

  • It is not affected by any news or occurrence of events that take place regarding the company.
  • Many announcements like financial results, new technical discovery, high-rank executives exit or entry, change in government rules, etc. that affects the shares price of the company. An investor who is following technical analysis gets an early signal on price movements who many a time does not know the exact nature of information.
  • Technical analysis depends on mass psychology which changes and fluctuates sometimes.
  • Charts help to figure out trends that are in vogue. It helps to depict price patterns and share volume being traded.
  • Technical research helps to let us know the value at which stop loss can be applied to particular shares; this saves the investor from a bigger loss in the future.
  • It is more useful for short-term traders/investors.

We use both fundamental as well as technical analysis of different companies before providing share market tips to our clients. To know more please fill in the free trial form or contact us for the services that we provide.

How much money do you need to invest in stocks market?

The Indian stock market is basically divided into two stock exchanges. National Stock Exchange (around 2000 companies listed) and Bombay Stock Exchange (around 5000 companies listed).

The companies listed and traded on the stock exchange have a price range from low of Re. 1 to the high of Rs. 74000 per share. Now the question is how many numbers of shares you wish to purchase and of which company? Also, note the broker will charge you brokerage charges and certain mandatory government taxes.

indian rupees

Investors are often confused about how much minimum amount they can invest in the stock market. There is no rule as to what minimum and maximum amount one can invest in stocks. Though this question has been asked by those who wish to start investing in the stock market, it might have crossed others’ mind too who are sitting on the fence, and who have small regular savings.

Technically your bare minimum amount required depends upon the requirements of the brokerage firm to open an account and operating it. Operating or maintaining charges have to be paid on yearly basis. There are many online brokers where you can open an account free that is no requirement of minimum account balance. Even to purchase shares your invested capital should be a bit more than (Number of shares x share price plus brokerage charges plus taxes).

One should note that brokerage commission for buying and selling stocks increase significantly on a percentage basis.  In other words, a higher amount of transaction negligible amount, it will be per transaction. Usually, it is ‘economics of scale’ which counts in your realized returns.

Apart from the cost of buying/selling, you have to think about how many different companies’ share you will buy/sell. It is suggested that you buy minimum shares of 15 to 20 different companies representing different sectors/industries so that you build up a diversified portfolio. By diversifying your portfolio you are actually minimizing (spreading) the risk that you can take, as share market is volatile.

There is a number of shares that are priced below Rs. 10 each. You do not have to put in thousands and lakhs of rupees to start trading in India.

If you are new to the stock market and are in a learning phase it is recommended to start with low. Anything between Rs. 100 to Rs.1000 will be good. Provided your sole intention is of learning. Even if you lose it will not hurt your financial standing.

If your intention is to earn as for your ‘day to day pocket expenses’ you can start with Rs.50000.

Buy shares of those companies that are traded actively. Have a disciplined approach, that is, do not get carried away by rumors (they are very frequent in the stock market). Keep an eye on your trading expense. Purchase sufficient amount of shares as the purchase of stocks in small amounts leads to higher acquiring cost. See to it that brokerage charges are the minimum. Opening a trading account can be free but for the transaction, you will have to pay brokerage fee for each and every transaction. Check if the trading platform is seamless and has various advanced tools or not, as they help you to come to form your decision.

In case you need any tips on which stocks you should select and which to leave contact us or take a free trial by filling up the online form.