What is Sensex? How Is the Sensex Calculated?

What is the sensex

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.NoExchange tickerSymbolCompaniesSectorDate Added
1500820ASIANPAINT.BOAsian PaintsPaints21 December 2015
2532215AXISBANK.BOAxis BankBanking – Private
3532977BAJAJ-AUTO.BOBajaj AutoAutomobile
4500034BAJFINANCE.BOBajaj FinanceFinance (NBFC)24 December 2018
5532978BAJAJFINSV.BOBajaj FinservFinance (Investment)
6532454BHARTIARTL.BOBharti AirtelTelecommunications
7500124DRREDDY.BODr Reddy’s LaboratoriesPharmaceuticals
8532281HCLTECH.BOHCL TechnologiesIT Services & Consulting
9500010HDFC.BOHDFCFinance (Housing)
10500180HDFCBANK.BOHDFC BankBanking – Private
11500696HINDUNILVR.BOHindustan Unilever LimitedFMCG
12532174ICICIBANK.BOICICI BankBanking – Private
13532187INDUSINDBK.BOIndusInd BankBanking – Private18 December 2017
14500209INFY.BOInfosysIT Services & Consulting
15500875ITC.BOITC LimitedCigarettes & FMCG
16500247KOTAKBANK.BOKotak Mahindra BankBanking – Private19 June 2017
17500510LT.BOLarsen & ToubroEngineering & Construction
18500520M&M.BOMahindra & MahindraAutomobile
19532500MARUTI.BOMaruti SuzukiAutomobile
20500790NESTLEIND.BONestlé IndiaFMCG23 Dec 2019
21532555NTPC.BONTPCPower generation/Distribution
22500312ONGC.BOOil and Natural Gas CorporationOil exploration and Production
23532898POWERGRID.BOPower Grid Corporation of IndiaPower generation/Distribution20 June 2016
24500325RELIANCE.BOReliance Industries LimitedConglomerate
25500112SBIN.BOState Bank of IndiaBanking – Public
26524715SUNPHARMA.BOSun PharmaPharmaceuticals8 August 2011
27532540TCS.BOTata Consultancy ServicesIT Services & Consulting
28532755TECHM.BOTech MahindraIT Services & Consulting
29500114TITAN.BOTitan CompanyDiamond & Jewellery23 Dec 2019
30532538ULTRACEMCO.BOUltraTech CementCement23 Dec 2019

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