Sensex
The Sensex is an important stock market index that is widely followed by investors, traders, and financial analysts in India. In this article, we will explain what Sensex is, how it is calculated, and its significance in the Indian stock market.
What is Sensex?
- The Sensex is a benchmark index of the Bombay Stock Exchange (BSE). It represents the performance of the top 30 companies listed on the BSE based on market capitalization. These 30 companies are selected based on their liquidity, trading frequency, and market capitalization. The index was launched in 1986 and has since become one of the most widely tracked indices in the Indian stock market.
How is Sensex calculated?
- The Sensex is calculated using the free-float market capitalization method. This means that only the shares available for trading in the market are considered while calculating the index. The index is calculated using the formula:
Sensex = (Total market capitalization of the 30 companies / Divisor)
The divisor is a number used to adjust for various corporate actions such as bonus issues, stock splits, and rights issues that affect the market capitalization of the companies listed on the BSE.
Significance of Sensex
- The Sensex is an important indicator of the overall performance of the Indian stock market. It reflects the sentiment of the market and is widely used by investors and traders to make investment decisions. A rising Sensex indicates a positive sentiment in the market, while a falling Sensex indicates a negative sentiment. Moreover, the Sensex also serves as a benchmark to compare the performance of individual stocks or mutual funds.
Factors influencing Sensex
- The Sensex is influenced by several factors such as economic indicators, global events, and company-specific news. Economic indicators such as GDP growth rate, inflation, and interest rates can have a significant impact on the Sensex. Global events such as geopolitical tensions, trade wars, and natural disasters can also affect the Sensex. Moreover, company-specific news such as earnings reports, mergers and acquisitions, and regulatory changes can impact the stock prices of individual companies listed on the BSE and, in turn, affect the Sensex.
In conclusion, the Sensex is an important indicator of the overall health of the Indian stock market. It is calculated using the free-float market capitalization method and represents the performance of the top 30 companies listed on the BSE. The Sensex is widely followed by investors and traders and serves as a benchmark to compare the performance of individual stocks or mutual funds. The factors that influence the Sensex are varied and include economic indicators, global events, and company-specific news.
