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The Bombay Stock Exchange (BSE) introduced the Sensex in 1986 as a key index representing the performance of 30 major companies in India. Sensex serves as an important market sentiment indicator, investment benchmark, and economic health measure, influencing investor decisions and foreign investment. It is calculated using free-float market capitalization and plays a crucial role in guiding corporate strategies and policymaking.

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7 views

BBA financial project

The Bombay Stock Exchange (BSE) introduced the Sensex in 1986 as a key index representing the performance of 30 major companies in India. Sensex serves as an important market sentiment indicator, investment benchmark, and economic health measure, influencing investor decisions and foreign investment. It is calculated using free-float market capitalization and plays a crucial role in guiding corporate strategies and policymaking.

Uploaded by

bibekmanjan007
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Introduction

◦ The Bombay Stock Exchange (BSE) is the oldest stock


exchange in Asia, established in 1875. It introduced Sensex in
1986 as a way to gauge the performance of the Indian stock
market.

◦ Sensex, also known as the S&P BSE Sensex, is a stock market


index consisting of 30 prominent companies listed on the BSE.
It is one of the most widely tracked indices in India.

◦ This presentation explores the significance of Sensex, its


calculation, and its role in the Indian capital market.
What is Sensex?
◦ Sensex, or the Sensitive Index, is a weighted stock market index
of 30 financially sound companies from various sectors. These
companies are chosen based on their market capitalization,
liquidity, and representation of critical sectors in the economy.
◦ Sensex, or the S&P BSE Sensex, is a benchmark index of the
Bombay Stock Exchange (BSE) in India.
◦ It represents the 30 largest and most actively traded stocks on
the BSE, giving a measure of the overall performance of the
Indian stock market.
◦ Sensex is often considered the pulse of the Indian economy.
◦ The Sensex is re-evaluated two times a year, one in June and the
next in December.
Why is Sensex Important?
◦ 1. Market Sentiment Indicator: Sensex reflects investor
sentiment and market trends.
◦ 2. Investment Benchmark: Used by investors to compare
the performance of their investments.
◦ 3. Economic Indicator: Reflects the overall economic health
of the country.
◦ 4. Guide for Investors: Helps in making informed investment
decisions by tracking market trends.
◦ 5. Wealth Generation: It helps in wealth generation for
investors through capital appreciation and dividends.
◦ Global Recognition: It is recognized globally, attracting
foreign investment into the Indian stock market.
Calculation of Sensex
◦ Sensex is calculated using the free-float market capitalization method.
◦ Free-Float Market Capitalization: The total market value of a company's
shares that are available for trading, excluding shares held by
promoters or governments.
◦ Formula: Sensex = (Free-Float Market Capitalization / Base Market
Capitalization) × Base Index Value (100).
◦ Example
◦ If the total current free-float market capitalization is ₹10,000 crore and
the base market capitalization is ₹250 crore:
Beta and Systematic Risk
◦ 1. Beta: Measures the volatility of a stock or portfolio
compared to the market as a whole.
◦ 2. Systematic Risk: Risk inherent to the entire market or
market segment, which cannot be avoided through
diversification.
◦ 3. Example: How changes in interest rates or inflation affect
the entire market.
Unsystematic Risk
◦ 1. Unsystematic Risk: Risk that is unique to a particular
company or industry.
◦ 2. Diversification: This risk can be minimized by holding a
diversified portfolio of stocks.
◦ 3. Example: How a company-specific event (like a product
launch failure) affects its stock price.
Impact of Sensex on the
Economy
◦ 1. Reflecting Economic Growth: A rising Sensex is often
associated with economic growth, boosting investor
confidence.
◦ 2. Influencing Foreign Investment: A strong Sensex attracts
foreign investors, leading to an inflow of capital into the
economy.
◦ 3. Guiding Corporate Strategy: Companies monitor Sensex
trends to make strategic decisions, such as expansions,
mergers, and acquisitions.
◦ 4. Economic Sentiment: Sensex movements impact consumer
and business sentiment, influencing spending and investment
behavior.
Role of Sensex in Capital
Market
◦ 1. Market Benchmark: Acts as a standard against which the
performance of other stocks and indices are measured.
◦ 2. Investor Confidence: A rising Sensex boosts investor
confidence, while a falling Sensex might indicate economic
problems.
◦ 3. Indicator for Policy Makers: Used by policymakers to gauge
economic performance and adjust policies accordingly.
◦ 4. Global Indicator: Serves as a reflection of India’s economic
standing in the global market.
Conclusion
◦ Sensex is more than just a number; it's a barometer of the
Indian economy's health and a guiding light for investors.
◦ Understanding its importance and how it works can lead to
better investment decisions and a deeper understanding of
market dynamics.

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