HomeStockMarket Basics

Everything about SENSEX

Like Tweet Pin it Share Share Email

Get a Useful Insight on Everything about Sensex

Sensex is actually the benchmark index of the BSE. Here BSE stands for Bombay Stock Exchange. The actual full form of Sensex is sensitive index. It is also known in the market terms as S&P BSE Sensex index. Sensex actually depicts the performance of 30 largest as well as the most active companies that are listed on the Bombay Stock Exchange. The origin of Sensex can be attributed back to the year 1986 and in India it’s got the prestige of being the oldest stock index. Thus the total number of stocks in Sensex is 30 and on March 15, 2017, rupees 4,986,299 crores was the full market capitalization of Sensex and rupees 2,687,777 crores was its free float market capitalization.

The list of 30 companies covered under Sensex

The thirty companies covered under Sensex are Adani Ports, Asian Paints, Axis Bank, Bajaj Auto, Bharti Airtel, Cipla, Coal India, Dr Reddy’s Labs, GAIL, HDFC, HDFC Bank, Hero Motocorp, Lupin, HUL, ICICI Bank, Infosys, ITC, Larsen, M&M, Maruti Suzuki, NTPC, ONGC, Powergrid, Reliance, SBI, Sun Pharma, Tata Motors, Tata Steel, TCS, and Wipro.

Criteria of inclusion of such companies in Sensex

All these 30 companies are selected on the basis of their overall performance and most importantly the financial soundness. Thus in aggregate Sensex can be termed as the market weighted stock index that covers the high performance companies operating in the country. These companies in actual sense represent the multiple industrial sectors in the best manner.

The calculation process

Free float market capitalization method is used for calculation of Sensex. This method actually depicts the index in such a way that free float market value of these 30 stocks that are relative to the base period can be analyzed. The base value of Sensex remains to be 100 and the base year is 1978-79.

Meaning of Free Float

Free float symbolizes that the shares can be freely traded. The word free float is emphasized here because all shares are not open for trading purposes. There are many kinds of shares that may be locked in and thus do not fall under this category. Only those shares that are open for trading must be included.

Meaning of Market Capitalization

 When the entire worth of all the stocks of various companies is calculated then it is called as market capitalization. For a particular company market capitalization is reached by multiplying the total number of shares issued by the company and the stock price.

The actual calculation of Free Float Market Capitalization

Once the information from market capitalization is obtained then this figure is multiplied with the free float factor. Thus the annual result is free float market capitalization. Each company submits information regarding its free floating shares and on the basis of that free float factor is determined. Such kind of information is provided by the companies to BSE on a quarterly basis.

The Final value of SENSEX

In order to obtain the final value of Sensex the free float market capitalization figure is divided by the index divisor. The index divisor is basically a parameter that keeps an account of the various corporate actions especially the changes that are seen in stocks. This divisor is basically nothing but the value of the Sensex index itself as calculated in the base year.