General Money || Personal Finance || Stock Markets || Real Estate ||
There are many parameters one needs to consider, to determine price trends of individual stock. The stock price of any company would primarily have two components in it to move either ways – it’s Stock News & Index News. Stock news includes all news & noise the company makes in the market all about itself. Index news is the news & noise that the entire Indices put together create about many different companies in the market. So this way, make sure you analyse why a particular stock moves up. Okay let’s get to basics to make you understand.
What is Nifty Index?
The NIFTY 50 index is National Stock Exchange of India’s [NSE] benchmark broad based Stock market Indices for the Indian equity market. Full form of NIFTY is National Stock Exchange Fifty . It represents the weighted average of 50 Indian company stocks in 12 sectors which are spread into 16 Industries and is one of the two main stock indices used in India, the other being the Sensex.
16 Industries in Nifty & their respective Weighted average (as on 01/04/2019)
Why do Index prices go up or down?
As told above Nifty has 50 stocks that forms the underlying for all movements in Nifty, that means price movements of Nifty 50 stocks will cause corresponding moves of Nifty Index. An aggregate measure of price moves of all stocks, will trigger movements in the Index.
Now why has Nifty Index has soared higher but not your stock?
Remember, there are 16 Industries that forms those 50 stocks & not all Industries move in tandem. Now to understand the math behind the Nifty rise – look at the above chart – Banking / Finance, Technology & Oil and Gas – these are top 3 industries that comprises Nifty, so a combined weightage of just these 3 Industries put together is around 63% of overall Index. So with this you can form a base to your assumption/analysis that – stocks which are part of only these industries have moved significantly higher compared to the rest of the sectors – say from Nifty Index @ 10,700 to 11,700. (Please note 10,700 levels is just taken as a base in our example, to denote Nifty index movement)
Tip for Successful Investing Habit:
Look for invest your money in sectors/industries that you understand very well instead of investing in sectors by following other people. Do not look at statistical numbers put up by media over previous bull market and buying stocks which have fallen. Please remember – All fallen stocks are not necessarily giving you bargain. This is an expensive lesson which forms a base for your investing habit.
– Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
Looking for an investment advice – Click here!
Are Media Stocks good to buy? Changing advertising trends