International Journal of Advanced in Management, Technology and Engineering Sciences ISSN NO : 2249-7455

INDEX CORRELATION DYNAMICS BETWEEN BSE

SENSEX AND NSE NIFTY
Dr R Raghu
Faculty Member, PG Department of Commerce, SIR CRR College
Drraghu730@gmail.com

Abstract
To securities markets in India, the last decade was impressive in many respects. The
number of securities listed, market capitalization, trade volumes and liquidity of stock
exchanges and the population of the consumer, has grown exponentially. The number of
stock exchanges and other intermediaries is also increased. In tandem with this
development, creditors, issuers and intermediaries’ profiles have changed considerably.
Several institutional changes have occurred on the market, leading to dramatically
reduced transaction costs and significant improvements in efficiency, transparency,
liquidity and safety. The Indian financial market is listed amongst the world's top markets
in a short time. This paper addresses NSE and BSE results in Nifty and Sensex and their
association.

Keywords: BSE, NSE, Sensex, Nifty and Financial Markets.

1. Introduction
The Sensex and Nifty 50 indices are closely monitored stock market benchmarks
over India and are generally considered as the Indian economy's leading indicators.
Sensex is a BSE SENSEX short form for calculating the efficiency of the 30 big,
liquid and financially sound companies listed on the Bombay Exchange (BSE) in
key sectors of the Indian economy. It is based on the floating-adjusted market
capitalization weighted estimate and its date is April 3, 1979. Nifty is the short form
of the Indian Index Services Limited Index Nifty 50 index. The index of Nifty refers
to the prices of 50 stocks as the base date listed on NSE on 3 November 1995. At
first the location in interventions was rather limited and constrained, helping to
quantify the overall market pattern. Over recent decades, though, indexes have been
used in many fields such as the performance management measure of mutual funds,
and the core commodity of indexed securities and index funds. This paper aims to
analyze whether the relationship of two leading indices.
In a country's economic life, the bursary is an institution of paramount
importance. Therefore, in the absence of the stock, the money of investors can not
be used for new projects as the assets to ownership i.e. will not be bought or sold by
the company. This is the sharing of shocks that generates private investment
uncertainty in companies. The regulatory framework and productivity of trade and
settlement is greatly improved by reforms on the financial sector including the
formation and empowerment of SEBI, market dematerialization and the electronic
exchange of assets, rolling settlement and the prohibition on postponements, the
complexity of risk management and derivative trading.
BSE SENSEX:
The BSE SENSEX is a free-float market-weighted stock market index of 30 well-
established and financially sound companies listed on Bombay Stock Exchange. The
30 component companies which are some of the largest and most actively traded
stocks, are representative of various industrial sectors of the Indian economy.
Published since 1 January 1986, the BSE SENSEX is regarded as the pulse of the

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International Journal of Advanced in Management, Technology and Engineering Sciences ISSN NO : 2249-7455

domestic stock markets in India. The base value of the SENSEX was taken
as 100 on 1 April 1979 and its base year as 1978–79. On 25 July 2001 BSE
launched DOLLEX-30, a dollar-linked version of the SENSEX.
NSE NIFTY:
The NIFTY 50 index National Stock Exchange of India's benchmark broad
based stock market index 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 13 sectors and is one of the two main stock indices used in India,
the other being the BSE Sensex.
Nifty is owned and managed by India Index Services and Products (IISL), which
is a wholly owned subsidiary of the NSE Strategic Investment Corporation
Limited. IISL had a marketing and licensing agreement with Standard & Poor's for
co-branding equity indices until 2013. The Nifty 50 was launched 1 April 1996, and
is one of the many stock indices of Nifty.
NIFTY 50 Index has shaped up as a largest single financial product in India, with
an ecosystem comprising: exchange-traded funds (onshore and offshore), exchange-
traded options at the NSE in India, and futures and options abroad at the SGX.
NIFTY 50 is the world's most actively traded contract.
The NIFTY 50 covers 13 sectors of the Indian economy and offers investment
managers exposure to the Indian market in one portfolio. During 2008-12, NIFTY
50 Index share of NSE market capitalisation fell from 65% to 29 % due to the rise of
sectoral indices like NIFTY Bank, NIFTY IT, NIFTY Pharma, NIFTY SERV
SECTOR, NIFTY Next 50, etc. The NIFTY 50 Index gives weightage of 39.47%
to financial services, 15.31% to Energy, 13.01% to IT, 12.38% to Consumer Goods,
6.11 to Automobile and nil to agricultural sector.
The NIFTY 50 index is a free float market capitalisation weighted index. The index
was initially calculated on full market capitalisation methodology. From 26 June 2009,
the computation was changed to a free-float methodology. The base period for the CNX
Nifty index is 3 November 1995, which marked the completion of one year of operations
of National Stock Exchange Equity Market Segment. The base value of the index has been
set at 1000 and a base capital of Rs 2.06 trillion. In February 2019, Britannia Industries
entered into Nifty 50 by replacing Hindustan Petroleum Corporation Ltd. HPCL will
move into Nifty Next 50 From 27 September, Nestle India will be included in NSE Nifty
50 Index and Nifty 50 Equal Weight Index. It will be replacing Indiabulls Housing
Finance Ltd.

2. Objectives of the Study

 To examine the CAGR of BSE Sensex and NSE Nifty

 To know the trend pattern of BSE Sensex
 To Examine the trend pattern of NSE Nifty
 To find the association between BSE Sensex and NSE Nifty

3. Hypothesis of the study

In order to find the statistical significance of the study the following hypothesis
were formulated.
H0 : There is no association between BSE Sensex and NSE Nifty
H1 : There is an association between BSE Sensex and NSE Nifty

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International Journal of Advanced in Management, Technology and Engineering Sciences ISSN NO : 2249-7455

4. Research Methodology
Data collection: The required data has been collected form the websites of BSE
and NSE for the period of 2004 – 2014. The data is referred as secondary data as it
was collected from the published source.
Statistical Tests: CAGR and Pearson Correlation test is employed to find the
significance of the study.

5. Data Analysis
The required data collected for the study is obtained from BSE and NSE during
the study period Jan 2004 to Dec 2014.
Table No 1: Monthly Closing Values of BSE and NSE &
Returns of Sensex vs Nifty
Monthly Closing values Return (%)
DATE NSE
BSE SENSEX Sensex Nifty
NIFTY
Jan-04 5695.67 1809.75 ** **
Feb-04 5667.51 1800.30 -0.49 -0.52
Mar-04 5590.60 1771.90 -1.36 -1.58
Apr-04 5655.09 1796.10 1.15 1.37
May-04 4759.62 1483.60 -15.83 -17.40
Jun-04 4795.46 1505.60 0.75 1.48
Jul-04 5170.32 1632.30 7.82 8.42
Aug-04 5192.08 1631.75 0.42 -0.03
Sep-04 5583.61 1745.50 7.54 6.97
Oct-04 5672.27 1786.90 1.59 2.37
Nov-04 6234.29 1958.80 9.91 9.62
Dec-04 6602.69 2080.50 5.91 6.21
Jan-05 6555.94 2057.60 -0.71 -1.10
Feb-05 6713.86 2103.25 2.41 2.22
Mar-05 6492.82 2035.65 -3.29 -3.21
Apr-05 6154.44 1902.50 -5.21 -6.54
May-05 6715.11 2087.55 9.11 9.73
Jun-05 7193.85 2220.60 7.13 6.37
Jul-05 7635.42 2312.30 6.14 4.13
Aug-05 7805.43 2384.65 2.23 3.13
Sep-05 8634.48 2601.40 10.62 9.09
Oct-05 7892.32 2370.95 -8.60 -8.86
Nov-05 8788.81 2652.25 11.36 11.86
Dec-05 9397.93 2836.55 6.93 6.95
Jan-06 9919.89 3001.10 5.55 5.80
Feb-06 10370.24 3074.70 4.54 2.45
Mar-06 11279.96 3402.55 8.77 10.66
Apr-06 12042.56 3557.60 6.76 4.56
May-06 10398.61 3071.05 -13.65 -13.68
Jun-06 10609.25 3128.20 2.03 1.86
Jul-06 10743.88 3143.20 1.27 0.48

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International Journal of Advanced in Management, Technology and Engineering Sciences ISSN NO : 2249-7455

Aug-06 11699.05 3413.90 8.89 8.61

Sep-06 12454.42 3588.40 6.46 5.11
Oct-06 12961.90 3744.10 4.07 4.34
Nov-06 13696.31 3954.50 5.67 5.62
Dec-06 13786.91 3966.40 0.66 0.30
Jan-07 14090.92 4082.70 2.21 2.93
Feb-07 12938.09 3745.30 -8.18 -8.26
Mar-07 13072.10 3821.55 1.04 2.04
Apr-07 13872.37 4087.90 6.12 6.97
May-07 14544.46 4295.80 4.84 5.09
Jun-07 14650.51 4318.30 0.73 0.52
Jul-07 15550.99 4528.85 6.15 4.88
Aug-07 15318.60 4464.00 -1.49 -1.43
Sep-07 17291.10 5021.35 12.88 12.49
Oct-07 19837.99 5900.65 14.73 17.51
Nov-07 19363.19 5762.75 -2.39 -2.34
Dec-07 20286.99 6138.60 4.77 6.52
Jan-08 17648.71 5137.45 -13.00 -16.31
Feb-08 17578.72 5223.50 -0.40 1.67
Mar-08 15644.44 4734.50 -11.00 -9.36
Apr-08 17287.31 5165.90 10.50 9.11
May-08 16415.57 4870.10 -5.04 -5.73
Jun-08 13461.60 4040.55 -17.99 -17.03
Jul-08 14355.75 4332.95 6.64 7.24
Aug-08 14564.53 4360.00 1.45 0.62
Sep-08 12860.43 3921.20 -11.70 -10.06
Oct-08 9788.06 2885.60 -23.89 -26.41
Nov-08 9092.72 2755.10 -7.10 -4.52
Dec-08 9647.31 2959.15 6.10 7.41
Jan-09 9424.24 2874.80 -2.31 -2.85
Feb-09 8891.61 2763.65 -5.65 -3.87
Mar-09 9708.50 3020.95 9.19 9.31
Apr-09 11403.25 3473.95 17.46 15.00
May-09 14625.25 4448.95 28.26 28.07
Jun-09 14493.84 4291.10 -0.90 -3.55
Jul-09 15670.31 4636.45 8.12 8.05
Aug-09 15666.64 4662.10 -0.02 0.55
Sep-09 17126.84 5083.95 9.32 9.05
Oct-09 15896.28 4711.70 -7.18 -7.32
Nov-09 16926.22 5032.70 6.48 6.81
Dec-09 17464.81 5201.05 3.18 3.35
Jan-10 16357.96 4882.05 -6.34 -6.13
Feb-10 16429.55 4922.30 0.44 0.82
Mar-10 17527.77 5249.10 6.68 6.64

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Apr-10 17558.71 5278.00 0.18 0.55

May-10 16944.63 5086.30 -3.50 -3.63
Jun-10 17700.90 5312.50 4.46 4.45
Jul-10 17868.29 5367.60 0.95 1.04
Aug-10 17971.12 5402.40 0.58 0.65
Sep-10 20069.12 6029.95 11.67 11.62
Oct-10 20032.34 6017.70 -0.18 -0.20
Nov-10 19521.25 5862.70 -2.55 -2.58
Dec-10 20509.09 6134.50 5.06 4.64
Jan-11 18327.76 5505.90 -10.64 -10.25
Feb-11 17823.40 5333.25 -2.75 -3.14
Mar-11 19445.22 5833.75 9.10 9.38
Apr-11 19135.96 5749.50 -1.59 -1.44
May-11 18503.28 5560.15 -3.31 -3.29
Jun-11 18845.87 5647.40 1.85 1.57
Jul-11 18197.20 5482.00 -3.44 -2.93
Aug-11 16676.75 5001.00 -8.36 -8.77
Sep-11 16453.76 4943.25 -1.34 -1.15
Oct-11 17705.01 5326.60 7.60 7.76
Nov-11 16123.46 4832.05 -8.93 -9.28
Dec-11 15454.92 4624.30 -4.15 -4.30
Jan-12 17193.55 5199.25 11.25 12.43
Feb-12 17752.68 5385.20 3.25 3.58
Mar-12 17404.20 5295.55 -1.96 -1.66
Apr-12 17318.81 5248.15 -0.49 -0.90
May-12 16218.53 4924.25 -6.35 -6.17
Jun-12 17429.98 5278.90 7.47 7.20
Jul-12 17236.18 5229.00 -1.11 -0.95
Aug-12 17429.56 5258.50 1.12 0.56
Sep-12 18762.74 5703.30 7.65 8.46
Oct-12 18505.38 5619.70 -1.37 -1.47
Nov-12 19339.90 5879.85 4.51 4.63
Dec-12 19426.71 5905.10 0.45 0.43
Jan-13 19894.98 6034.75 2.41 2.20
Feb-13 18861.54 5693.05 -5.19 -5.66
Mar-13 18835.77 5682.55 -0.14 -0.18
Apr-13 19504.18 5930.20 3.55 4.36
May-13 19760.30 5985.95 1.31 0.94
Jun-13 19395.81 5842.20 -1.84 -2.40
Jul-13 19345.70 5742.00 -0.26 -1.72
Aug-13 18619.72 5471.80 -3.75 -4.71
Sep-13 19379.77 5735.30 4.08 4.82
Oct-13 21164.52 6299.15 9.21 9.83
Nov-13 20791.93 6176.10 -1.76 -1.95

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Dec-13 21170.68 6304.00 1.82 2.07

Jan-14 20513.85 6089.50 -3.10 -3.40
Feb-14 21120.12 6276.95 2.96 3.08
Mar-14 22386.27 6704.20 5.99 6.81
Apr-14 22417.80 6696.40 0.14 -0.12
May-14 24217.34 7229.95 8.03 7.97
Jun-14 25413.78 7611.35 4.94 5.28
Jul-14 25894.97 7721.30 1.89 1.44
Aug-14 26638.11 7954.35 2.87 3.02
Sep-14 26630.51 7964.80 -0.03 0.13
Oct-14 27865.83 8322.20 4.64 4.49
Nov-14 28693.99 8588.25 2.97 3.20
Dec-14 27499.42 8282.70 -4.16 -3.56
CAGR 17% 16%
Source: BSE and NSE
Graph 1: Pictorial representation of Sensex and Nifty

From the above table it is identified that compound annual growth rate (CAGR) is
17% for Sensex and 16% for Nifty.
Correlation Analysis between Sensex and Nifty:
Correlations
Sensex Nifty
Pearson Correlation 1 .999**
Sensex Sig. (2-tailed) .000
N 132 132
Pearson Correlation .999** 1
Nifty Sig. (2-tailed) .000
N 132 132
**. Correlation is significant at the 0.01 level (2-tailed).

Interpretation: The correlation is highly significant at 1% level of significance,

and it is almost equalling to 1, which is perfect positive correlation. The

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International Journal of Advanced in Management, Technology and Engineering Sciences ISSN NO : 2249-7455

significance value is less than 1%, suggests the rejection of null hypothesis and
acceptance of alternative hypothesis.

6. Findings of the study

 The trend of the Sensex and Nifty is in the same direction

 The CAGR for BSE Sensex is 17%
 The CAGR for NSE Nifty is 16%
 The correlation coefficient value is 0.999
Hence it is found that Sensex and Nifty is moving in the same direction, indicating
that a perfect positive correlation is existing between Sensex and Nifty.

References

[1] Bhole, L.M, "Financial Institutions and market structure", Tata McGraw-Hill Publishing
Limited,New Delhi.
[2] Balkrishan and Nartha, "SS security Markets in India", Kanishka Publisher Distributors, New Delhi.
[3] Parsanna Chandra, "Investment and Security Analysis", Tata McGraw- Hill Publishing Limited, New
Delhi.
[4] K.Ashwathappa, "Essentials of Business Environment", Himalaya Publishing House.
[5] www.bseindia.com
[6] www.nseindia.com

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