What is SENSEX and how is it calculated?

 

If you are a stock market investor and remain active in the stock market, then you must have escaped the word SENSEX. Even many of you who are not into stock trading must have heard about SENSEX. But what is SENSEX really? What is its role and purpose in the share market? There will be many of you who may not know its true meaning. Now we tell you a history of SENSEX.

 

The SENSEX or Sensory Index was launched by the "Bombay Stock Exchange" (BSE) on January 1, 1986. It is one of the major stock market indices of India. This Sensex was established to know the fluctuations in the share prices of companies in the market. In this, fluctuations in share prices of 30 companies are evaluated. These 30 companies are large, well-known and financially strong according to market value. If the SENSEX is rising, it shows that the stock price of most of the BSE companies has gone up and if the SENSEX has decreased, it shows that the share price of most of the BSE companies has dropped. The base year of SENSEX is 1978-79 and the base index value is set at 100 for this time. This means that in 1978 the Sensex was assumed to be at the level of 100 points which was at 113.28 points in 1979 and today the BSE is hovering around 39000 points due to increase in market value. The one more important thing is to know the full form of the Sensex. SENSEX- Stock Exchange Sensitive Index.

 

The BSE Sensex has been calculated on a daily basis in the market capitalization account of 30 listed companies.

 

List of SENSEX 30 companies

S NO	Company Name	Industry	Weight
1	RELIANCE IND.	Integrated Oil & Gas	12.38%
2	HDFCBANK	Banks	11.34%
3	HDFC	Housing Finance	8.91%
4	INFOSYS	IT Consulting & Software	7.14%
5	ICICIBANK	Banks	6.71%
6	ITC	Cigarettes, Tobacco Products	5.17%
7	TCS	IT Consulting & Software	5.21%
8	HINDUNILVR	Personal Products	5.12%
9	KOTAK BANK	Banks	5.17%
10	L&T	Construction & Engineering	3.00%
11	BHARTIARTL	Telecom Services	2.98%
12	AXISBANK	Banks	2.79%
13	ASIAN PAINT	Furniture, Furnishing, Paints	2.25%
14	SBIN	Banks	2.18%
15	BAJFINANCE	Finance (including NBFCs)	1.90%
16	NESTLEIND	Packaged Foods	1.82%
17	MARUTI	Cars & Utility Vehicles	2.14%
18	HCLTECH	IT Consulting & Software	1.54%
19	SUN PHARMA	Pharmaceuticals	1.52%
20	TITAN	Other Apparels & Accessories	1.28%
21	POWERGRID	Electric Utilities	1.12%
22	ULTRACEMCO	Cement & Cement Products	1.12%
23	TECHM	IT Consulting & Software	1.02%
24	NTPC	Electric Utilities	0.99%
25	ONGC	Exploration & Production	0.94%
26	BAJAJ-AUTO	2/3 Wheelers	1.00%
27	M&M	Cars & Utility Vehicles	1.12%
28	HEROMOTOCO	2/3 Wheelers	0.78%
29	TATASTEEL	Iron & Steel	0.68%
30	INDUSINDBK	Banks	0.69%

 

 

How is Sensex Fluctuation calculated?

 

Suppose the Sensex is currently at the level of 40000. For convenience we assume that there are only two registered companies in BSE, one of which is named "Kotak" and the other is named "Axis". Suppose one share of  Kotak is worth Rs 400 and it has total outstanding shares of 10000 whereas one share of Axis is worth Rs 1000 and it has a total outstanding shares of 7500. BSE will have total market capitalization due to these two companies (Rs 400 x 10000) + (Rs 1000 x 7500) = Rs 115 lakhs.

 

Now suppose that the next day, Kotak Company's share price rises 25% to 500, and Axis Company's share price decreased by 10% to 900. Now the total market capitalization of BSE will be at these new share prices: - (Rs 500 x 10000) + (Rs 900 x 7500) = Rs 117.5 lakh.

 

The market capitalization of BSE increases by 2.17% to 117.5 lakhs due to fluctuations in the prices of shares of both companies. Due to this, the Sensex will reach 40868, which is 2.17% higher than 40000.

 

Similarly, if the share prices of both companies decrease, the total market capitalization of BSE will also decrease. In the BSE, this fluctuation happens every minute. If there is more buying of shares of companies, then the Sensex goes up and if the selling is more, then the Sensex comes down.