Understanding Sensex
Sensex Basics :
Ask below questions to yourself -
1. Do I understand how to read Sensex?
2. Do I know when to enter and exit stock market?
3. Can I understand all of this with minimal knowledge and resources!!!
- Yes, I know how to read stock market (if you fall in this category then you may want to check "Strategy" section)
- No, I take advice from my financial adviser
- Not really, I just talk to people and listen to news to make my investment decisions
- Ummm, can you really read stock market!!!
2. Do I know when to enter and exit stock market?
- Yes, I know exactly when to exit/enter stock market (If you are in this category then you may want to check "Strategy" section)
- No, I just go with the flow
- Not exactly, but if I see market going down that's when I exit the market
- Ummm, can you really identify entry and exit points!!!
3. Can I understand all of this with minimal knowledge and resources!!!
- NO, I believe it requires lot of knowledge and one needs to be a trader/ financial analyst/ working in stock market/ etc
- NO, I believe we need to have fee based subscription service from expert stock market guru's
- I believe, Stock market is a gamble and you cannot predict it
- Yes, you can! You don't need to be a stock market guru to understand, all you need is basic understanding of sensex and simple technique described here.
Understanding Sensex
What is Nifty (NSE) or Sensex (BSE)?
Sensex refers to "Sensitivity Index" and is generally associated with the stock market indices. What is an index? An index is basically an indicator. It gives us a general idea about whether most of the stocks have gone up or most of the stocks have gone down. There are currently two major stock exchanges in India, The Bombay Stock exchange (BSE) and The National Stock Exchange (NSE).
The BSE Sensex is an indicator of all the major companies listed on Bombay Stock Exchange (BSE).
The Nifty is an indicator of all the major companies listed on National Stock Exchange (NSE).
If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
More information can be found below:
I am Confused!!!
Don't worry, a general understanding of what an Index means is enough.
Now that we know what Sensex means, our next step is to figure out, how to read market and what will be future market direction. How does this help us?
- A rising tide lift all boats - If we know probable market direction then our chosen Stock/ Mutual Fund/ ETF has more probability of moving in that direction. In short if we feel that probable future market direction will be down then we can get out of market and protect our profits or avoid any loss.
- Knowing ahead of time about "probable" market direction will provide us with an "edge" to enter/exit the market.
- It will keep us aware of the near future market direction there by avoiding surprises as well as BIG LOSSES.