Let’s know what sense SENSEX makes?
The Sensex basically is the combination of two words ‘sensitive index’. This was introduced back in year 1986 on January 1 by the Bombay Stock Exchange (BSE). It also known as S&P BSE Sensex index and is one of the most prominent and oldest stock market indexes in India.
Most of the people do not know the exact meaning of Sensex, but it is crucial to know the hardcore meaning of it before you invest in the mutual funds.
Any statistical aggregate that measure the changes in the stock market is referred to as index.
- The Sensex consists of 30 companies which are selected on the basis of their overall performance and financial soundness.
- These companies which are there in Sensex are well-established, renowned, large and financially good companies of the main sectors.
- By knowing the Sensex index, you get a general idea about your stocks and shares that whether they have gone up or down.
What happens when Sensex goes up?
Sensex indicates all the changes that occur in the stock market.
- If Sensex goes up, then it indicates that prices of the stocks have gone up of most of the companies which come under Bombay Stock Exchange (BSE).
What happens when Sensex goes down?
If it goes down, then it indicates that the prices of the stocks have gone down of most of the companies which come under BSE.
30 companies which come under Sensex India are mentioned below:
- Adani Ports
- Coal India
- Asian Paints
- Dr Reddys Lab
- ICICI Bank
- Maruti Suzuki
- Sun Pharma
- Axis Bank
- Tata Motors
- Bajaj Auto
- Tata Steel
- Bharti Airtel
- HDFC Bank
- Hero Motocorp
How to calculate SENSEX?
It is calculated by using a method known as ‘Free-float Market Capitalization’ method.
It shows the calculated free-float market value of the stocks of all the 30 companies relative to a particular base period.
What is Free-float Market Capitalization?
The shares which are open for trading are referred to as free float. Not all the shares are free floating, as some of shares are locked or pledged by some person or some may be in the holding of government.
- First, we need to calculate market capitalization for knowing the Sensex.
- The market capitalization can be calculated by multiplying the price of the stock by the number of shares issued by that particular company.
- The market capitalization value is then multiplied with the free float factor.
- So, this gives the free-float market capitalization.
What is free float factor?
Free float factor is the information derived from all the companies about their free floating shares.
All the companies provide this information to BSE on a quarterly basis. And, then all this information is summed up to get the final free-float market capitalization.
To get the Sensex value, this figure which we got from free-float market capitalization is divided by the index divisor.
The divisor is simply the value of the Sensex Index in a base year.
As per the reports published on March15, 2017, the free float market capitalization is Rs. 2,687,777 crores and the Full Market capitalization of Sensex is 4,986,299 crores.