What is sensex

There are two major stock exchanges in India. Each stock exchange has a major index constituted by them with representation from major sectors of the economy reflecting the cross-section of the economy. The index is expected to reflect the economy and the movement of the index, and its ups and downs speak about the health of the economy. The Sensex basically is an indicator of all the major companies listed on BSE which is located in Mumbai.

Sensex is an index comprising of the top 30 stocks, among some stocks listed on the BSE. It is assumed that these 30 stocks replicate the market.

These 30 stocks are taken from 23 different industries operating in the Indian economy, based on parameters defined by the Exchange and managing the index. Sensex is calculated taking into consideration the stock prices of 30 different companies listed on BSE. This is one of the best methods for calculating a stock market index.

In the earlier years, Sensex would be calculated using the weighted market capitalization method. However, from September 1st, onwards the free-float market capitalization method is being used. The top 30 companies that are taken into consideration are changed from time to time.

These stocks are the largest and most actively traded stocks on the BSE. The criteria for selecting stocks is as follows:. The Sensex reflects the movements in the Indian stock market. If the Sensex increases, it means the prices of the underlying 30 stocks have increased.

If the Sensex has decreased, it means the prices of the underlying 30 stocks have decreased. The Sensex is the oldest index in India, and people consider it to be a reflection of the Indian economy. Just like the Sensex, Nifty is also an index. Nifty reflects the National Stock Exchange. The name Nifty comes from the combination of National and Fifty.

The selection of the top 50 stocks is from 12 different sectors, including information technology, financial services, consumer goods, telecommunications, automobiles, etc. Earlier, the Sensex used the weighted market capitalization method. However, from September 1st, , the free-float market capitalization method has been in use.

Upon selecting the 30 stocks for the index, it uses the free float market capitalization method to calculate the value of the index. The first step is to determine the free float market capitalization of 30 companies that form the index. Free Float factor is the percentage of total shares a company issues and that are readily available to the common public to trade.

This also means the total outstanding shares of the company. Additionally, the shares issued to the promoters, the government, etc. The market capitalization is the market value of the company. Once the free float market capitalization is determined. The value of BSE Sensex can be calculated using the formula below. The base period year for Sensex calculation is The base value index is Using the above formula, one can calculate the value of BSE Sensex.

To trade buy or sell securities on BSE, one needs to have a demat and a trading account. A demat will hold the shares in dematerialized or electronic form. Also, a demat account acts just like a bank account, where the securities are debited or credited based on the transaction.

A trading account will facilitate the sale and purchase of securities online. The next step is to register with a broker or brokerage platform, as one cannot directly purchase securities from the stock exchange. Stockbrokers are financial intermediaries who act as a link between the stock exchange and the trader. Many companies provide both trading and demat accounts. Both Nifty and Sensex use similar methods to derive their values.

However, there are a few basic differences between Nifty and Sensex. You may also like to read about the Sensex vs Nifty. Benchmark index is the primary metric for analyzing market trends.

The index indicates the performance of the entire stock market. The market also uses the benchmark index as a comparative measure. In other words, it measures the market returns from an average fund versus the amount that it would have earned.

Debt Mutual Funds. Top Performing MF s. Index Funds. For an investor it is very important to know the basic terminologies like Sensex meaning, what is Sensex, how the calculation are done. The term Sensex was named by a stock market analyst Mr. Deepak Mohoni, the word is a portmanteau of Sensitive and Index.

Till Jan1, the stock exchange did not have any official index. This was the time when Sensex was opted for gauging the performance of the Indian market.

The Sensex comprises of 30 prominent stocks which are derived from sectors and are traded actively in the exchange market. Sensex truly reflects the Indian stock market movement.

If the Sensex value increases it means that there is a general increase in the prices of shares whereas, if the Sensex decreases it means there is a general decrease in the price of shares.

Nifty is the other index calculated in India for the National Stock Exchange. The Sensex is one of the oldest stock indexes in India.

Sensex is used to observe the overall growth, development of particular industries, ups and downs of the Indian economy by the investors. Historically Sensex used the weighted market capitalization methodology, but from September 1, , it shifted to Free Float Market Capitalization methodology. All the major indices in the world use the same methodology. The performance of the 30 selected key stocks directly reflects the level of the index.

It excludes the shares that are held by the promoters, government, etc. Whereas the word market capitalization represents the valuation of the company. Market capitalization is determined by multiplying the price of a stock with the number of shares issued by that company. The above two terminologies play a major role while calculating Sensex.

The free float market capitalization of 30 selected companies are added and which get divided by We serve cookies on this site to analyze traffic, remember your preferences, and optimize your experience. Karvy is a diversified financial services and IT solutions provider with a large footprint across India, providing employment to thousands of people in practically all states in the country, and has a proven 40 year record of integrity and a reputation for excellence in the financial markets.

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