What is Sensex? How Is the Sensex Calculated?

The term Sensex is a combination of two words i.e sensitive and index and it was coined by Deepak Mohoni who is a stock market analyst. It is the benchmark index of the Bombay Stock Exchange. The Sensex has 30 best performed traded stocks on the BSE. It is float-adjusted and capitalized market-weighted. The Sensex was examined two times a year that is in June and December. It was established in 1986, it is the oldest stock index in India. It was operated by (S&P). Investors use this index to observe the gain and falls of the market. It is calculated in both Indian rupees and U.S. dollars.

Understanding the Sensex

                                  The Sensex was established on Jan. 1, 1986. It is used to track the performance of the top performed 30 companies which are listed under BSE (Bombay Stock Exchange). These 30 companies occupy larger sectors in India’s economy. The top five companies listed on the Sensex index were:

• Infosys
• HDFC Bank
• Reliance Industries
• Housing Development Finance Corp.
• ICICI Bank

Sensex was calculated based on the market capitalization when it was first launched but after that, it was replaced with a free-float capitalization method in 2003 September. The index uses a company’s float rather than its shares, which means Sensex doesn’t include restricted stocks that can’t be sold readily. Despite all these changes, the INDEX objectives and the listing of companies are selected by the S&P Committee based on several criteria. The following shows the criteria : 

• Those companies must be listed on the Bombay Stock Exchange.
• Those companies are large-cap companies.
• The stocks are to be liquid.
• Those companies keep the sector balance in line with the Indian equity market. 

History of the Sensex

                The BSE Sensex fell to 12.8 % which is its worst ever fall on April 18, 1992. The Sensex index experienced drastic growth from 1991 when India opened up its economy. The biggest profits occurred in the 21st century. This was mainly due to the fastest improvement in the economy in the world. India’s expanding economy is much to the rise of the Indian market. But, In recent years India’s economic growth has slowed down. The outbreak of the Pandemic coronavirus makes the Indian economy fall down and also has its marks on future gains.

How Does the Sensex Work?

          The S&P Sensex index works for the Bombay Stock Exchange, Profoundly known as the Sensex or Sensex Index of India, It is a benchmark index of BSE(Bombay Stock Exchange) which was the oldest stock exchange in India. Here India’s best performed 30 companies will list and It shows the performance of these 30 companies will be tracked by Sensex. So many investors use the index Sensex for the performance of their shares. It shows detailed information about stocks and also shows sectoral performance.

How Is this Index Calculated?

                            The Sensex was calculated using the free float capitalization method. This method was much similar to the market capitalization method, in which companies are weighted depending on their share of the total market capitalization of the index. Such that, The Sensex gives more weight to the largest companies within its index. But free-float capitalization was not purely the same as the Market Capitalization Method. free-float capitalization only takes the shares account which are freely available to trade such as it restricted the shares which are held by companies insiders.

How Has it Performed in Recent Decades?

                        The Sensex has gained by around 14% per year between 1986 and 2021. This growth reflects the consistent growth of the Indian economy during the time frame, and in particular the expansion of the Indian economy. It declined around 40% in March 2020 due to the pandemic coronavirus health crisis but recovered drastically during this year. The Sensex went to an all-time high during the month of February 2021.

How to invest in SENSEX?

        As we saw earlier, SENSEX has the top 30 companies in India and if an investor wants to buy the shares in SENSEX they can start buying shares that are listed on the Bombay Stock Exchange.

Companies Listed Under SENSEX?

SL.No	Exchange ticker	Symbol	Companies	Sector	Date Added
1	500820	ASIANPAINT.BO	Asian Paints	Paints	21 December 2015
2	532215	AXISBANK.BO	Axis Bank	Banking – Private
3	532977	BAJAJ-AUTO.BO	Bajaj Auto	Automobile
4	500034	BAJFINANCE.BO	Bajaj Finance	Finance (NBFC)	24 December 2018
5	532978	BAJAJFINSV.BO	Bajaj Finserv	Finance (Investment)
6	532454	BHARTIARTL.BO	Bharti Airtel	Telecommunications
7	500124	DRREDDY.BO	Dr Reddy’s Laboratories	Pharmaceuticals
8	532281	HCLTECH.BO	HCL Technologies	IT Services & Consulting
9	500010	HDFC.BO	HDFC	Finance (Housing)
10	500180	HDFCBANK.BO	HDFC Bank	Banking – Private
11	500696	HINDUNILVR.BO	Hindustan Unilever Limited	FMCG
12	532174	ICICIBANK.BO	ICICI Bank	Banking – Private
13	532187	INDUSINDBK.BO	IndusInd Bank	Banking – Private	18 December 2017
14	500209	INFY.BO	Infosys	IT Services & Consulting
15	500875	ITC.BO	ITC Limited	Cigarettes & FMCG
16	500247	KOTAKBANK.BO	Kotak Mahindra Bank	Banking – Private	19 June 2017
17	500510	LT.BO	Larsen & Toubro	Engineering & Construction
18	500520	M&M.BO	Mahindra & Mahindra	Automobile
19	532500	MARUTI.BO	Maruti Suzuki	Automobile
20	500790	NESTLEIND.BO	Nestlé India	FMCG	23 Dec 2019
21	532555	NTPC.BO	NTPC	Power generation/Distribution
22	500312	ONGC.BO	Oil and Natural Gas Corporation	Oil exploration and Production
23	532898	POWERGRID.BO	Power Grid Corporation of India	Power generation/Distribution	20 June 2016
24	500325	RELIANCE.BO	Reliance Industries Limited	Conglomerate
25	500112	SBIN.BO	State Bank of India	Banking – Public
26	524715	SUNPHARMA.BO	Sun Pharma	Pharmaceuticals	8 August 2011
27	532540	TCS.BO	Tata Consultancy Services	IT Services & Consulting
28	532755	TECHM.BO	Tech Mahindra	IT Services & Consulting
29	500114	TITAN.BO	Titan Company	Diamond & Jewellery	23 Dec 2019
30	532538	ULTRACEMCO.BO	UltraTech Cement	Cement	23 Dec 2019