Wat do u know about SENSEX
one of my favourite is the peculiar nature of the sensex
What’s SENSEX?
SENSEX is the short form of The Bombay Stock Exchange Sensitive Index. A sweet short name for a long boring name.
It’s a benchmark – it shows the health of the share market. If it goes down, it means that the market is going down (Bear market) and if it goes up, the market is going up (Bull market). Therefore going up is a good sign – it means that you’ll get more price for the shares you have.
What does it capture?
It captures the movement of the share prices. A rising SENSEX means share prices are going up, as told earlier. Plus it also means that companies are doing well and shareholders will be earning more from their shares.
In overall, it also reflects the condition on the Indian economy. Why? Because if companies do well, it augurs well for the Indian economy too.
How the SENSEX is calculated?
The SENSEX is calculated on the basis of 30 biggest shares.
These shares make more than 50% of the total market capitalization in the BSE market.
They are the most traded ones, obviously because market cap is high
They represent in all 13 sectors of the economy – all the companies are leaders in their respective fields.
There is a committee – the Index Committee who selects these shares. The committee consists of experts in share markets. They modify the SENSEX at regular intervals.
SENSEX uses free-float market capitalization. Now what’s that? Market cap you already know. It’s simply the value of the company calculated by (share price * number of shares in the market). Free float means that these shares are open for everyone to trade. They are open to the general public.
Again a question: can shares be closed too? Yes, some shares may be held by the owners/founders/directors/employees of the company, some may be by the government or FDI. These shares are kind of closed as no one can sell/buy them in the market. These kinds of shares are not used in calculation of SENSEX.
The criteria for selecting these shares is a bit complex. Any share can’t into these elite 30.
The shares should have been bought/sold everyday for the past one year – this ensures that the selected shares are the most happening ones.
The shares should be among the top 150 shares in average value (buy/sell).
The shares should be listed in BSE for more than a year.
The company should be a trusted one and be leaders in their own field.
This ensures that there’s no black sheep among the 30 selected. To see the listed companies click here.
Why do SENSEX go up and down?
As the company’s performance change the shares go up or down. If the company is doing well or some news come that it will do well in future, SENSEX will go up. If there’s a bad news, SENSEX will go down.
Moreover, if there’s some positive news about the country like
So both companies and the country are responsible for the SENSEX movements.
SENSEX is a general index, there are other specific index too. We’ll discuss it sometime later.
How to read the SENSEX?
The base year of the SENSEX is 1978-79 and base value is 100. Actually it means calculations start with taking 1978-79 SENSEX as 100 and then if today’s SENSEX is 12009.59 means that the market value has increased to more than 120 times.
posted by Somjeet @ 9:25 PM
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