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WHAT IS SENSEX

Sensex

Sensex is the benchmark index of the BSE in India. It was launched on January 1, 1986 as a basket of 30 stocks representing the country's largest, financially-sound companies listed on the BSE.

The term ‘Sensex’ is a blend of words ‘Sensitive’ and ‘Index’ and was coined by stock market expert Deepak Mohini. The Sensex reflects the movements in the Indian stock market. It is considered the benchmark index of the Indian stock market. It is the oldest index in India and provides time series data from 1979, BSE, which was previously known as Bombay Stock Exchange, says on its website.

The bellwether index reflects the sentiment of the market and serves as a benchmark for fund managers to compare the performance of their funds. For investors, Sensex acts as a proxy for the Indian stock markets.

In simpler terms, If the Sensex value increases it means that there is a general increase in the prices of shares. On the other hand, if the value of Sensex declines, it means that there is a general decrease in share prices.

Since sensex comprises companies from all key sectors of the economy, it truly reflects the sentiment of the stock market in India.

How is the Sensex calculated?

Sensex, which is also referred to as BSE 30, was calculated based on the market capitalisation or “Full Market Capitalisation” when it was launched but shifted to a "Free-float Market Capitalisation" methodology from September 1, 2003. This method is used by all major index providers including MSCI and FTSE.

Free-float is that proportion of total shares issued by the company that is readily available for trading to the general public. It does not take into account promoters’ holding, government holding, and other shares that will not be available in the market for trading in the ordinary course of events.

Free-Float Market Capitalisation = Market Capitalisation x Free Float Factor

To give an example, let’s assume that Firm A has 100 shares. Out of these 100, 70 are available to the general public and 30 are owned by the government. This means that 70 are ‘free-floating' shares and thus the free float factor will be 70%.

‘Market capitalisation’ is the valuation of the company. It can be determined by multiplying the price of a share with the number of shares issued.

To calculate Sensex:

- The market capitalisations of all 30 companies in the index are determined.

- The Free Float market capitalisation of all 30 companies is calculated.

- Free Float market capitalisations of all the firms are added to get a total.

- Formula of Sensex is applied; Sensex = (total free float market capitalisation/ base market capitalisation) * Base index value.

- The base year to calculate Sensex is 1978-79 and the base value is static but it has to be changed. According to BSE, Rs. 2501.24 crore is to be used as the base market capitalisation.

- The base index value is 100.

So, Sensex = free float market capitalisation of 30 firms /25041.24 crores*100

So, How are these 30 companies selected?

The BSE's criteria for selecting these companies is as followed:

BSE-listed stock: The stock should have a listing history of at least one year on BSE to be considered.

Market Capitalisation: The company should be in the Top 100 companies listed by full market capitalisation.

Trading frequency: The Security should have been traded on each and every trading day for the last one year, BSE says. Exceptions to this can be made in case of extreme reasons.

Average Daily Trades and Average Daily Turnover: The Security should be in the Top 150 firms listed by average number of trades per day and by average value of shares traded per day for the last one year.

Track Record: In the opinion of the Index Committee, the firm should have an acceptable track record, BSE says on its website.

The Index Committee meets every quarter to review all the BSE indices including SENSEX. However, every review meeting may or may not lead to a change in the constituents.

How is Sensex different from Nifty?

Nifty is the benchmark index of the National Stock Exchange. ‘National Fifty’ make up Nifty.

The major difference between Sensex and Nifty is the number of constituents they have.

While Nifty 50 constitutes of the top 50 companies that are actively traded in NSE, Sensex comprises the top 30 companies actively traded in BSE.

Sensex is more niche and on the other hand, Nifty is broader as it has 50 firms.

SENSEX NEWS

Adani stock rout roils markets; Sensex falls 874 pts, Nifty ends at 17,600
Group loses $50 bn in m-cap in two sessions; Contagion fear drags market, banking stocks| January 27, 2023, Friday
Stocks slide in volatile trading in run-up to Budget, Fed Reserve meet
Nifty50 down 1.3%; Bank Nifty slips 2.5%; FPIs withdraw Rs 2,394 cr| January 25, 2023, Wednesday
Sensex, Nifty advance on gains in IT, financial shares and global cues
Shares of Reliance Industries on Monday ended marginally lower, after the company reported a 15 per cent decline in net profit ...| January 23, 2023, Monday
Sensex, Nifty fall for 2nd day on global economic slowdown concerns
The broader NSE Nifty fell by 80.20 points or 0.44 per cent to end at 18,027.65 as 36 of its stocks closed with losses| January 20, 2023, Friday
Sensex sheds 237 pts dragged by HUL, RIL, Infosys; Nifty ends below 18,050
Closing Bell: Broader markets bled more than benchmarks with the BSE Midcap and Smallcap indices falling up to 0.7 per cent| January 20, 2023, Friday
Rs 20,000-cr Adani Enterprises FPO opens on Jan 27: Should you subscribe?
Shares of Adani Enterprises have soared 78.41 per cent so far this fiscal year (FY23), as against 4.2 per cent rise in the S&P ...| January 19, 2023, Thursday
High RM prices to dent HUL's Q3 margins, revenues may rise up to 14% YoY
Higher advertising spends coupled with inflationary pressures, analysts said, are likely to squeeze EBITDA margins up to 154 ...| January 18, 2023, Wednesday
Rebound in power demand to fire up related stks over medium-term: Analysts
On the bourses, shares of Adani Power, Adani Transmission, CG Power, NHPC, NTPC, and Adani Green Energy have surged up to 61 per ...| January 17, 2023, Tuesday
Sensex, Nifty decline as metal, financials shares retreat amid FII outflows
From the Sensex pack, Axis Bank, NTPC, HDFC, HDFC Bank, Mahindra & Mahindra, ICICI Bank, Reliance Industries and Maruti were ...| January 16, 2023, Monday
Street signs: Nifty's 20-DEMA, capital goods stocks gain, and more
Currently, the Nifty's 20-DEMA is around 18,080. If the index manages to surpass this key hurdle, it may see further upward ...| January 16, 2023, Monday

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