WHAT IS SENSEX

1. What is Sensex? 
2. How are Companies selected for Sensex? 
3. How is Sensex Calculated? 
4. What is BSE?
5. Companies in the Sensex
6. Conclusion
7. FAQs

What is Sensex?

Firstly, You might have come across this word related to the Stock Market in some way. Now let us see what is Sensex actually.

Now when you need to know the movement or trend of the market as a whole, You cannot sit and see every company’s trend or movement and understand. 

Meanwhile, there is a simple parameter for everyone to understand the whole movement of the market. Moreover, It is made up of the list of top 30 companies listed on the Bombay Stock Exchange. So Sensex is the indicator of the Bombay Stock Exchange (BSE). It is also known as the S&P BSE Sensex index. It also provides us the movement of the economy, Sensex is the oldest index of India. But it was started in 1986, so it contains most of the falls and rises of the economy, 

The Name Sensex derives from two words Sensitivity and Index. Deepak Mohoni derived the name Sensex. It shows the sensitivity of the Stock Exchange. in simple words, it is the Sensitivity Index of Bombay Stock Exchange hence it is named Sensex. So, Market Analysts and Investors utilize it for the observation of the growth, development of the Indian economy. 

How are Companies selected for Sensex? 

Firstly, There is a committee namely S&P BSE Index Committee which selects the companies in the list, there are five categories in which the company should be fit to be included in the Sensex, they are: – 

• Firstly, The Company should be listed on the Bombay Stock Exchange (BSE) 
• The market capitalization of the Company should be between large to mega capitalization 
• The Liquidity of the Company should be relative on the Exchange
• The Revenue of the Company should be generated from its core operations.
• The Company should be maintaining the sector in line with the equity market. 

How is Sensex Calculated? 

Before September 2003, Sensex calculated on the method of the market capitalization-weighted way. But, after September 2003, Sensex calculated by the free float capitalization method, in the technique of free-float capitalization it facilitates a weighting for the effect of a company on the index. 

Firstly, let us see how Sensex is calculated. The word free float means the shares of a company that are freely floating in the market means the shares of the company which are traded in the market. here the shares held by the promoters, officials, employees of the companies are excluded, in simple words, the shares which are locked are not considered while calculating the Sensex. 

Also know : How the Stock Market works?

For example, assume that the total number of shares of the HDFC bank are 100 and from the total number of shares let us assume 20 shares held by the promoters etc., and the remaining 80 shares are freely trading in the market, and also assume that the share price of HDFC bank is 10 per share, now the free-float market capitalization of HDFC bank comes to number of freely traded shares X the current market price of a share that is 80×10= 80 is the free-float market capitalization of the HDFC bank 

Also, In the same manner, the free float capitalization of the 30 companies is calculated and the total free float of the 30 companies is added. And if the free-float market capitalization of the 30 companies goes up the Sensex goes up and if the free-float market capitalization of the 30 companies goes down the Sensex also goes down. 

What is BSE?

Sensex is the index of the Bombay Stock Exchange. so let us know something about the Bombay Stock Exchange. 

Bombay Stock Exchange is located in Mumbai. It was founded by an influential businessman of Mumbai namely Premchand Roychand and is the oldest Stock Exchanges in Asia and plays a prominent role in the field of Stock Market, it is a place where sellers and buyers of the Stock Market meet, but nowadays everything is online so this platform also offers online buying and selling of shares.  

Firstly, The Exchange was founded in the year 1875 as the Native Share and Stock Brokers’ Association. BSE has nearly 6,000 companies listed in it and is one of the largest exchanges in the world, besides the New York Stock Exchange (NYSE), NASDAQ, Japan Exchange Group, London Stock Exchange Group, and Shanghai Stock Exchange. 

So, It was recognized as a Stock Exchange by the Government of India on August 31, 1957. But In 2000 Bombay Stock Exchange opened its derivatives market which helped them to expand their trading platform. 

BSE has played an important role in India’s Capital markets and retail debt market and also has a role in the growth of the Indian Corporate Sector.But It has changed from open-floor trading system to an electronic trading system in the year 1995. 

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Companies in the Sensex

Firstly, It is felt as an honor to be included in the Sensex list, here is the list of companies in the Sensex, there are 31 Companies in the it, they are: – 

Name of the Company

Housing Development Finance Corporation (HDFC)

Cipla

State Bank of India (SBI)

Dr. Reddy’s Laboratories

HDFC Bank Ltd.

Hero Motocorp

Infosys

Kotak Mahindra Bank

Lupin

Oil & Natural Gas Corporation (ONGC)

Reliance Industries

Tata Steel

Larsen & Toubro

Mahindra & Mahindra

Tata Motors

Hindustan Unilever

Asian Paints

ITC

Wipro

Sun Pharmaceuaticals

ICICI Bank

Axis Bank

Bharathi Airtel

Maruti Suzuki India

Tata Consultancy Services

NTPC

Power Grid Corporation of India

Adani Ports

Bajaj Auto

Coal India

Tata Motors (DVR Ordinary)

CONCLUSION

In simple words, Firstly, Sensex is an index of the top 30 Stocks listed on the Bombay Stock Exchange (BSE). Secondly, The word Sensex was derived from two words that are Sensitivity and Index, and it was coined by Deepak Mohoni.

FAQs

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