Lesson 03 — Indices: Nifty, Sensex, Nifty 500
Week 01 · Lesson 3 of 7 · Week 01 — Market Basics (India)
An index is a basket of selected stocks designed to represent a market segment and track performance. "Index = market ka report card." Helps you understand o...
What is an index?
An index is a basket of selected stocks designed to represent a market segment and track performance.
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"Index = market ka report card."
Why it matters
- Helps you understand overall market direction
- Gives context: "Is the market up or is my stock down for company-specific reasons?"
- Benchmark: your portfolio should ideally beat the index over time
India's key indices
| Index | Tracks | # of stocks | Best for |
|---|---|---|---|
| Sensex | BSE top 30 | 30 | Headline market direction |
| Nifty 50 | NSE top 50 | 50 | Institutional benchmark |
| Nifty 500 | Broader market | 500 | True market representation (large + mid + small) |
| Nifty Midcap 100 | Mid-cap segment | 100 | Growth-oriented stocks |
Nifty 500 — why we start with it
Nifty 500 covers a broader slice of listed companies than Nifty 50 and gives wider market representation (large + mid + small within the index family).
What to look for
| Signal | What it means |
|---|---|
| Nifty 500 up, your stock down | Sector-specific or company-specific issue |
| Nifty 500 down, your stock stable | Your stock is outperforming — good sign |
| Both moving together (high correlation) | Market-wide trend dominating your stock |
| Nifty 500 up, your sector down | Sector rotation happening — not necessarily bad |
How indices are constructed (simple)
Many major indices are free-float market cap weighted — weights depend on investable market cap.
On InvestingSamjho
The Screener lets you filter companies across the Nifty 500 universe. When you screen for "Revenue > 1,000 Cr" or "ROE > 15%", you're effectively carving out your own custom index from the broader market.
Key takeaway
An index is a benchmark — use it to separate "Is my stock bad?" from "Is the whole market down?". Nifty 500 gives a true market view, not just mega-caps.