When one of our readers asked for a chart of the Nifty, we wondered how the Sensex and Nifty correlate. Sensex is the index of the BSE (Bombay/Mumbai Stock Exchange) and Nifty is the index of the NSE, the National Stock Exchange of India.

See the Yahoo Answers page here for more background on the Sensex, BSE, Nifty and NSE.

To look at the correlation between the two indices, we used Yahoo Finance to compare the Sensex with the Nifty for the last 5 years. See the picture here for a screenshot.

The conclusion is clear that both indices follow very much the same route most of the time. Therefore at Stock Trend Investing, we follow just one of the two indices. Since the BSE Sensex is a little better known outside India than the NSE Nifty, we analyze the trend in the Sensex.

For investors who want to invest in the Indian market and who want to avoid expensive mutual funds, a few index funds are available.

Index funds

The iShares S&P India Nifty 50 Index Fund follows as it says the Nifty. Looking at the correlation between the Nifty and the Sensex we have peace of mind and sleep well at night when we make our investments in this fund based on the stock trend analysis of the Sensex.

For those investors who want to invest in a Sensex index fund, Franklin Templeton Investments operates the Franklin India Index Fund - BSE Sensex Plan

They also operate the Franklin India Index Fund - NSE Nifty Plan
 

In our Gold Membership section we have besides the monthly updated trend charts also listed a number of mutual funds that cover the Indian market.

Regardless that our trend charts for the Indian market indicate already for months a positive trend, we can’t stress enough that investing in stocks, index funds and mutual funds always carries risk. Be aware of those. This blog post is just for information and this shall not be seen as investment advice.

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