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Sensex

The SENSEX is India's oldest and most widely followed stock market index. It is operated and maintained by the Bombay Stock Exchange and is composed of 30 of the largest and most actively traded stocks on the BSE. The SENSEX represents some of the biggest sectors of the Indian economy and is used to track the performance of the country's financial markets. It has grown at an average annual rate of 14% since its inception in 1986, reflecting the strong growth of the Indian economy and expansion of its middle class over that period.

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27 views

Sensex

The SENSEX is India's oldest and most widely followed stock market index. It is operated and maintained by the Bombay Stock Exchange and is composed of 30 of the largest and most actively traded stocks on the BSE. The SENSEX represents some of the biggest sectors of the Indian economy and is used to track the performance of the country's financial markets. It has grown at an average annual rate of 14% since its inception in 1986, reflecting the strong growth of the Indian economy and expansion of its middle class over that period.

Uploaded by

n6zgdmbrrs
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SENSEX

Stock market Index

• The stock market index is the most important indices of all as it


measures overall market sentiment through a set of stocks that
are representative of the market. The market index reflects
expectations about the behaviour of the economy as a whole. It is a
precursor of economic cycles. The function of a stock index is to
provide investors with information regarding the average share
price in the market.

• A well-constructed index captures the overall behaviour of the


market and represents the return obtained by a typical portfolio
investing in the market. An ideal index must represent changes in
the prices of scrips and reflect price movements of typical shares
for better market representation

• Stock indices are termed as leading economic indicators as they


indicate what is going to happen in the economy in the future

What is SENSEX

• The term Sensex refers to the benchmark index of the BSE in


India. The Sensex is comprised of 30 of the largest and most
actively traded stocks on the BSE and provides a gauge of India's
economy.

• The Sensex is reviewed semiannually each year in June and


December. Created in 1986, the Sensex is the oldest stock index in
India and is operated by Standard and Doors. Analysts and
investors use it to observe the cycles of India's economy and the
development and decline of particular industries.
• The Sensex was launched on Jan. 1, 1986. It is both a bellwether
and an investable index used to track the performance of India's
30 largest and most financially sound companies. These companies
are listed on the BSE (previously known as the Bombay Stock
Exchange) and represent some of the biggest and most important
sectors of the Indian economy. As such, it is India's most-tracked
index. It is float-adjusted and market capitalization-weighted.

• Free-float market capitalisation method: Free-float is the


percentage of shares that are freely available for purchase in the
markets. It excludes strategic investments in a company such as
the stake held by government, controlling shareholders and their
families, the company’s management, restricted shares due to IPO
regulations, and shares locked under the employee stock ownership
plan.

• In this methodology, the weight of a scrip is based on the free-


float market capitalisation. Free-float market capitalisation
reflects the investible market capitalisation which may be much
less than the total. The BSE has introduced this methodology in
the case of the BSE Sensex since September 1, 2003.

• The Sensex is calculated in Indian rupees (INR) and U.S. dollars.


As of Aug. 31, 2021, the mean total market cap of the index was
3.71 trillion rupees.

Its constituents are selected by the BSE index Committee based on


several criteria:
• They should be listed in India on BSE.

• They should be a large-to mega-cap company.The stocks should be


relatively liquid.

• The companies should generate revenue from core activities.

• They should keep the sector balanced broadly in line with the
Indian equity market

• The top five constituents listed on the index were:

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

How Has the Sensex Performed in Recent Decades?


The Sensex has grown at a compounded rate of roughly 14% per year
between 1986 and 2021. This growth reflects the substantial growth
of the Indian economy during that time frame, and in particular the
expansion of that nation’s middle class. The Sensex declined by nearly
40% in March 2020 in the midst of the coronavirus health crisis but
recovered strongly over the remainder of the year. The Sensex went
on to set a new all-time high as of February 2021.

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