Stock Market Basics · Lesson 6 of 14 · Updated October 2026 · 5 min read
When the news says “the market fell today”, it usually means an index fell. An index tracks a basket of shares to show how a part of the market is doing, in one number.
In short: The Nifty 50 tracks 50 large companies on the NSE. The Sensex tracks 30 large companies on the BSE. They are scorecards for the market, not shares you buy directly, though index funds let you invest in them.
How an index works
An index picks a set of companies and combines their prices into one number. Bigger companies carry more weight, based on the value of their shares that are freely traded (free-float market capitalisation). So a 5% move in a giant company moves the index far more than a 5% move in a smaller one.
Common Indian indices
| Index | What it tracks |
|---|---|
| Nifty 50 | 50 large companies on NSE |
| Sensex | 30 large companies on BSE |
| Nifty Next 50 | The next 50 large companies after the Nifty 50 |
| Nifty Midcap and Smallcap indices | Medium and smaller companies |
| Sector indices (Bank Nifty, Nifty IT and others) | Companies from one sector |
Why your portfolio may not match the index
If the Nifty rose 1% but your shares fell, it is because you own different companies, in different amounts. An index is an average. Some shares in it go up and some go down on the same day.
Investing in an index
You cannot buy “the Nifty” itself, but an index fund or ETF buys all the companies in the index in the same proportions. It is a low-cost way to own a broad slice of the market without picking individual shares. A SIP in an index fund is a common starting point for beginners.
Common questions
Is a high Sensex a bad time to invest?
The index level alone doesn’t tell you. It often hits new highs as company profits grow. Investing regularly over time reduces the risk of picking a bad moment.
Do companies stay in the index forever?
No. Indices are reviewed regularly, and companies are added or removed based on size and other rules.
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Education, not investment advice. Figures and rules as of October 2026; check the latest before you act.