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What is Sensex? - How to calculate it? in Detail

August 05, 2021

Have you ever heard about what is Sensex? Have you ever noticed that many people keep talking about  Sensex? But you do not understand their news because you do not understand what is Sensex? 

Whenever you think of investing, then you must have come over Sensex in your brain. But you do not understand the definition of these words because you do not know what is Sensex?  today’s post is concentrated on Sensex. Today, through this article of ours, we will know what is Sensex and what work is done through it?
First, you have to know what is nifty. 
We are talking about Sensex. So Sensex is also similar to Nifty in a way but only 30 firms are placed in Sensex as correlated to Nifty. Where Nifty is also termed Nifty 50 because 50 firms are listed in it. Let us know what is Sensex.
Have you ever heard about what is Sensex? Have you ever noticed that many people keep talking about Sensex? But you do not understand their news because you do not understand what is Sensex? Whenever you think of investing, then you must have come over Sensex in your brain. But you do not understand the definition of these words because you do not know what is Sensex? today's post is concentrated on Sensex. Today, through this article of ours, we will know what is Sensex and what work is done through it? First, you have to know what is nifty. We are talking about Sensex. So Sensex is also similar to Nifty in a way but only 30 firms are placed in Sensex as correlated to Nifty. Where Nifty is also termed Nifty 50 because 50 firms are listed in it. Let us know what is Sensex. Read more: Basics of share market What is Sensex? Sensex is the BenchMark index of our Indian Stock Market, which tells the rise and fall of the shares registered in BSE (Bombay Stock Exchange). Through this, we get data about the performance of the 30 biggest companies registered in it. Sensex is the oldest stock market index in India, which was established in 1986. Sensex is a stock market index and its most essential function is to keep seeing the value of all the shares of listed companies in the stock market and then after a day's work give us an average price so that we can get listed in the stock market. It is easy to get data about the rise and fall in the prices of the shares of the companies. Bombay Stock Exchange (BSE), which is the most traditional stock exchange in India, has a total of 30 major Indian companies. These companies are very big if seen according to the market capitalization, it is currently 37% of the whole Indian GDP. These companies work in a way to set the trend of the share market. And in easy terms, the index created to measure the values of shares of big companies of India, which focus on the increasing and decreasing costs of the shares of these companies, is called Sensex. How is Sensex formed? Now we discussed what is Sensex? Now we will know how Sensex is executed and by whom it is made, we will understand the method of its formation. Sensex is a part of the Bombay Stock Exchange and Sensex is made up of shares of only thirty companies recorded on the Bombay Stock Exchange whereas the total number of companies is listed on the Bombay Stock Exchange. The number is more than 6000. When the Sensex is measured, only the shares of 30 companies that are dominant in the market are covered in it. The idea behind including the share values of these 30 companies is that the shares of these 30 companies are the most purchased and sold. Next, it is the 30 biggest companies, their market cap is about half of all the shares listed on the stock exchange, which is a big accomplishment. The third reason is that these 30 companies are selected from 13 different sectors, these 30 companies are estimated to be the most significant in their sector. These 30 companies are selected by the index committee of the stock exchange, this board consists of people from many parts, which can mainly involve government eminent economists and banks. How does the Sensex increase or decrease? Sensex Its role is to provide us with stock information. It observes the movements in the shares of 30 companies under it. If the price of the shares of the companies listed in the Sensex is increasing in the market, then Sensex also increases and goes up. On the other hand, if the price of shares of companies listed in the Sensex is falling in the market, then Sensex also starts falling. The most primary reason for the cost of shares going up and down is the performance of those companies. For example, if the company has launched a new and project in the market, then there is a chance that the price of the company's shares will increase. So, if the company is going through some problem then people want to leave it and the shares start selling in more numbers. Due to the high quantity of the stock, the share price decreases, and Sensex starts coming down. On what basis 30 companies are selected? The points that the Index Committee takes into account while choosing 30 companies to be involved in the Sensex are as follows: 1.The shares of this company should be placed on the stock exchange for at least 1 year. 2. It is necessary to buy and sell the stock of that company on all the days that the stock market is open within the last year. 3. According to the number and amount of average trades per day, these companies must be among the biggest 150 companies in the country. Which are the best 30 best-performing companies? 30 businesses/companies included in the Sensex were included for the first time in 1986, all these companies are very powerful financially and also very large in terms of market cap. The demand for the shares of these companies always lives in the stock market. Such companies are termed "blue chip" companies. A sum of 30 companies is involved in the Sensex of BSE i.e. Bombay Stock Exchange. The list of companies listed in BSE Sensex is as follows Tata steel Reliance HDFCBANk INFY HDFC ICICIBANK TCS KOTAKBANK HINDUNILVR ITC AXIS BANK LT BAJAJ FINANCE SBIN BHARATIARTL ASIAN PAINT HCLTECH MARUTI M&M ULTRACEMCO SUNPHARMA TITAN TECHM NESTEIND BAJAJFINSV POWERGRID INDUSINDBK NTPC BAJAJ-AUTO ONGC At this point in the Indian SHARE market, in a way, the law of these companies runs. All these companies are major companies in their own sectors and each company describes its sector in a way in the Sensex. Advantages of Sensex Well, the hugest advantage of Sensex is that through this, the investor can know and understand the future changes in the market and therefore invest his money in the right way. But we also have some such profits from the Sensex that do not have much effect or benefit directly but are very useful indirectly. The movement of the rupee keeps on changing according to the market and when the rupee is strong then things get more affordable in the country. Let us know about another benefit. 1. When companies recognize Sensex going up, then investors also want to invest capital in such companies and when a lot of capital is collected from the investors then the companies grow and expand. And whenever a company grows, it needs fresh people for that, then in such a situation they will give employment to more people and this will directly mean reduction of unemployment. 2. When the stock market is healthy and the Sensex moves up, then many outside investors start coming into the country and when they invest money in Indian businesses, it will increase the rupee. And the rupee strengthens against the international currency. And when the rupee rises, it makes things more affordable. For example, foreign introduced salmon will be available at lower prices than before due to the rapid depreciation of the rupee. The stock market is reaching towards constant heights, at a point when it was started in 1990, then the Sensex used to be only one thousand, but in today's time, this number has reached a five-digit number, in today's time it has crossed 30,000. And is creating new histories every day. We require it to scale new heights in eternity also and help investors make profits. How Sensex is calculated Now you will not have trouble understanding how the Sensex is calculated. Let us understand this with an example – suppose there are two companies in the index – A and B. Company A has 1000 shares, out of which 600 are open market, and the price of one share of this company is Rs.50. Company B has 2000 shares, out of which 1000 are open market, and the price of one share of this company is Rs.100. Market capital of ompany A = 50000 Market capital of Company B = 200000 Free-float factor = 0.60 for Company A Free-float factor = 0.50 for Company B Total free float market capital of the Index = (50000*0.60) + (200000*0.50) = 130000 Now suppose the index of the base year was 5000. Value of Index = (130000 x 100)/5000 = 2600 And thus the Sensex will be 2600. Reference Article https://www.investopedia.com/terms/s/sensex.asp https://www.indiainfoline.com/investment-guide/what-is-sensex-bse-nse-nifty https://webinkeys.com/what-is-sensex-and-how-is-it-made/ https://en.wikipedia.org/wiki/BSE_SENSEX FAQ on SENSEX 1. When was NSE established? Answer: NSE was established in 1993. 2. What is the Full form of NSE? Answer: National Stock Exchange 3. What is the Full form of BSE? Answer: Bombay Stock Exchange READ MORE- 1.BASICS OF SHARE MARKET 2.HOW TO BUY & SELL SHARE SELL ONLINE 3.15 PROFIT-MAKING LOW INVESTMENT BUSINESS IDEAS 4.TOP 7 INTRADAY TRADING STRATEGY 5.TOP 7 BEST TAXING INVESTMENT 6 What is intraday trading? 7. What is portfolio management?

What is Sensex?

Sensex is the BenchMark index of our Indian Stock Market, which tells the rise and fall of the shares registered in BSE (Bombay Stock Exchange). Through this, we get data about the performance of the 30 biggest companies registered in it.
 Sensex is the oldest stock market index in India, which was established in 1986.
Sensex is a stock market index and its most essential function is to keep seeing the value of all the shares of listed companies in the stock market and then after a day’s work give us an average price so that we can get listed in the stock market. It is easy to get data about the rise and fall in the prices of the shares of the companies.
Bombay Stock Exchange (BSE), which is the most traditional stock exchange in India, has a total of 30 major Indian companies. These companies are very big if seen according to the market capitalization, it is currently 37% of the whole Indian GDP.
These companies work in a way to set the trend of the share market. And in easy terms, the index created to measure the values of shares of big companies of India, which focus on the increasing and decreasing costs of the shares of these companies, is called Sensex.

How is Sensex formed?

Now we discussed what is Sensex? Now we will know how Sensex is executed and by whom it is made, we will understand the method of its formation.
Sensex is a part of the Bombay Stock Exchange and Sensex is made up of shares of only thirty companies recorded on the Bombay Stock Exchange whereas the total number of companies is listed on the Bombay Stock Exchange. The number is more than 6000.
When the Sensex is measured, only the shares of 30 companies that are dominant in the market are covered in it. The idea behind including the share values of these 30 companies is that the shares of these 30 companies are the most purchased and sold.
Next, it is the 30 biggest companies, their market cap is about half of all the shares listed on the stock exchange, which is a big accomplishment. The third reason is that these 30 companies are selected from 13 different sectors, these 30 companies are estimated to be the most significant in their sector.
These 30 companies are selected by the index committee of the stock exchange, this board consists of people from many parts, which can mainly involve government eminent economists and banks.

How does the Sensex increase or decrease?

Sensex Its role is to provide us with stock information. It observes the movements in the shares of 30 companies under it. If the price of the shares of the companies listed in the Sensex is increasing in the market, then Sensex also increases and goes up.
On the other hand, if the price of shares of companies listed in the Sensex is falling in the market, then Sensex also starts falling.
The most primary reason for the cost of shares going up and down is the performance of those companies. For example, if the company has launched a new and project in the market, then there is a chance that the price of the company’s shares will increase.
So, if the company is going through some problem then people want to leave it and the shares start selling in more numbers. Due to the high quantity of the stock, the share price decreases, and Sensex starts coming down.

On what basis 30 companies are selected?

The points that the Index Committee takes into account while choosing 30 companies to be involved in the Sensex are as follows:
1.The shares of this company should be placed on the stock exchange for at least 1 year.
2. It is necessary to buy and sell the stock of that company on all the days that the stock market is open within the last year.
3. According to the number and amount of average trades per day, these companies must be among the biggest 150 companies in the country.

Which are the best 30 best-performing companies?

30 businesses/companies included in the Sensex were included for the first time in 1986, all these companies are very powerful financially and also very large in terms of market cap. The demand for the shares of these companies always lives in the stock market.
Such companies are termed “blue chip” companies. A sum of 30 companies is involved in the Sensex of BSE i.e. Bombay Stock Exchange. The list of companies listed in BSE Sensex is as follows
  1. Tata steel
  2. Reliance
  3. HDFCBANk
  4. INFY
  5. HDFC
  6. ICICIBANK
  7. TCS
  8. KOTAKBANK
  9. HINDUNILVR
  10. ITC
  11. AXIS BANK
  12. LT
  13. BAJAJ FINANCE
  14. SBIN
  15. BHARATIARTL
  16. ASIAN PAINT
  17. HCLTECH
  18. MARUTI
  19. M&M
  20. ULTRACEMCO
  21. SUNPHARMA
  22. TITAN
  23. TECHM
  24. NESTEIND
  25. BAJAJFINSV
  26. POWERGRID
  27. INDUSINDBK
  28. NTPC
  29. BAJAJ-AUTO
  30. ONGC



At this point in the Indian SHARE market, in a way, the law of these companies runs. All these companies are major companies in their own sectors and each company describes its sector in a way in the Sensex.


Advantages of Sensex

Well, the hugest advantage of Sensex is that through this, the investor can know and understand the future changes in the market and therefore invest his money in the right way.
But we also have some such profits from the Sensex that do not have much effect or benefit directly but are very useful indirectly. The movement of the rupee keeps on changing according to the market and when the rupee is strong then things get more affordable in the country. Let us know about another benefit.
1. When companies recognize Sensex going up, then investors also want to invest capital in such companies and when a lot of capital is collected from the investors then the companies grow and expand. And whenever a company grows, it needs fresh people for that, then in such a situation they will give employment to more people and this will directly mean reduction of unemployment.
2. When the stock market is healthy and the Sensex moves up, then many outside investors start coming into the country and when they invest money in Indian businesses, it will increase the rupee. And the rupee strengthens against the international currency. And when the rupee rises, it makes things more affordable. For example, foreign introduced salmon will be available at lower prices than before due to the rapid depreciation of the rupee.
The stock market is reaching towards constant heights, at a point when it was started in 1990, then the Sensex used to be only one thousand, but in today’s time, this number has reached a five-digit number, in today’s time it has crossed 30,000. And is creating new histories every day.

We require it to scale new heights in eternity also and help investors make profits.

How Sensex is calculated


Now you will not have trouble understanding how the Sensex is calculated.
Let us understand this with an example – suppose there are two companies in the index – A and B.

Company A has 1000 shares, out of which 600 are open market, and the price of one share of this company is Rs.50.

Company B has 2000 shares, out of which 1000 are open market, and the price of one share of this company is Rs.100.

Market capital of ompany A = 50000
Market capital of Company B = 200000
Free-float factor = 0.60 for Company A
Free-float factor = 0.50 for Company B
Total free float market capital of the Index = (50000*0.60) + (200000*0.50) = 130000
Now suppose the index of the base year was 5000.
Value of Index = (130000 x 100)/5000 = 2600
And thus the Sensex will be 2600.

For more information watch this video 

Reference Article


https://webinkeys.com/what-is-sensex-and-how-is-it-made/
FAQ on SENSEX
1. When was NSE established?
Answer: NSE was established in 1993.

2. What is the Full form of NSE?

Answer: National Stock Exchange
3. What is the Full form of BSE?
Answer: Bombay Stock Exchange


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