It has always been a question in the minds of investors if there is a return difference between Sensex and Nifty. Thank god… now we have 25-plus years of data to know Which is better Sensex or Nifty?
Both have created a new milestone this month (Dec 23). Sensex crossed the 70000 mark and Nifty crossed 21150.
Both indexes are widely tracked. Nifty is new (born in 1992) whereas Sensex is old. But both compete and are highly competitive in the eyes of investors. They always think about which to invest or take as a benchmark to compete. So let’s try to solve this puzzle of Sensex Vs Nifty.
Here are some of the pictures to showcase the subject.
Sensex Vs Nifty
Or
When the snake runs… rolling returns…
Which is better Sensex or Nifty?
Over the time frame of 1, 3, 5, 10 Years – Nifty beats Sensex on 1 & 3 years returns. But they are almost similar in 5 & 10 Years.
On rolling retunes Sensex is a bit high over Nifty.
Now why would this happen?
The answer is constituents of these 2 indexes.
We all know Sensex has 30 & Nifty has the top 50 Stocks. But every company has a different Market Capitalisation.
In market capitalization current market price CMP is the determining factor (the other being the number of shares). Shares CMP change as per profits and revenues earned by the company.
So, in the short run, 30 companies will differ in CMP growth than 50 companies.
But in the long run companies on aggregate will average around the growth of the country & inflation added together. So you do not see much difference in the return of Nifty & Sensex.
Constituents of Index
So what are these constituents of the Index we are talking about? These are the companies as per their market share.
However, not all companies have been consistent in performance.
How have indexes performed this year?
Did you notice?
Sensex is lagging behind Nifty on 1 or 3-year returns.
Nifty is ahead of Sensex from Jan 23 to Nov 23 by 0.8%.
Nifty is ahead of Sence from April 23 to Nov 23 by 2.2%.
But they make the same retunes 13.9% in the last 10 years!
