Introduction
The news is continuously reporting that the Sensex has risen. Alternatively, the market may have plummeted, causing investors to be fearful. The Sensex increased by 500 points. But, exactly, what do the terms "market" and "Sensex" mean? Why is it expressed as several points? We've gone through what Sensex and Nifty are in this article. What causes them to rise and fall? What is Sensex and how it is calculated?
What is the Meaning of Sensex?
Mr Deepak Mohoni, a stock market expert, coined the term Sensex, which is a combination of Sensitive and Index. The Sensex is a stock market index that largely represents the Bombay Stock Exchange (BSE), which was founded in 1875. There was no official index on the stock exchange until January 1, 1986. At the time, Sensex was used to assess the performance of the Indian stock market. The Sensex is made up of 30 well-known stocks that are taken from various sectors and are actively traded on the stock exchange. The Sensex accurately depicts the movement of the Indian stock market. If the Sensex value rises, it indicates that stock prices are rising in general, whereas if the Sensex falls, it indicates that stock prices are falling in general.
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The normal image of increasing Sensex.
The S&P BSE Sensex index can be used to track stock market booms and collapses. The BSE and S&P Dow Jones Indices formed an agreement to calculate the Sensex on February 19, 2013. The other index calculated for the National Stock Exchange in India is the Nifty. The Sensex index is made up of the 30 largest and most actively traded stocks on the BSE, and it serves as a barometer for the Indian economy. Sensex is one of India's oldest stock market indicators. Sensex is used by investors to track the overall growth, development of specific industries, and ups and downs of the Indian economy. The following are the factors for selecting stocks:
Listed on the Bombay Stock Exchange (BSE)
It should be a stock with a market cap of at least $1 billion.
Relatively liquid stocks
Core activities create revenue.
Sector involvement is varied and balanced in line with the Indian equity market.
The Sensex points meaning is a stock market index that tracks the performance of the Indian stock market. When the Sensex rises, the prices of the underlying 30 equities rise as well. If the Sensex falls, it signifies the prices of the 30 stocks that make up the index have fallen as well. The Sensex is India's oldest index, and it is widely regarded as a measure of the Indian economy. The Sensex is used by market research experts to determine general growth, industry development, and the stock market trend of a country.
What is BSE?
The Bombay Stock Exchange was once known as the Bombay Stock Exchange. It was founded in 1875 and is now located on Dalal Street in Mumbai, India. With a speed of 6 microseconds, it is Asia's first and fastest stock exchange. In addition, the BSE was India's first stock market to be launched. In stock, mutual funds, derivatives, debt instruments, and currencies, the BSE promotes trading with efficiency and transparency. It also offers risk management, clearing & settlement, and investor education in addition to trading. By offering a platform for raising capital, the BSE has played a vital role in establishing and expanding Indian financial markets. BSE SME is a variant of BSE. It serves as a trading platform for more than 250 small and medium-sized businesses. Through BSE StAR MF, it also offers mutual fund services. It is also the largest mutual fund platform in India. BSE Bond is a transparent electronic book mechanism method for the private placement of debt securities. It also has India INX, which is the country's first foreign exchange. The BSE Sensex is the company's most popular equity index. It's one of the most commonly used and followed indexes out there. In addition, the BSE Sensex trades on EUREX and the exchanges of Brazil, Russia, China, and South Africa (BRCS nations).
What is NSE?
In 1992, the National Stock Exchange of India Ltd was established. It is also India's largest financial market. It has the greatest average daily turnover of equity shares in India compared to any other stock exchange. NSE's business model is vertically integrated. It sees technology as a critical component of financial markets that will increase market transparency. For trading, the National Stock Exchange NSE divides its goods into three asset classes: stocks, derivatives, and fixed-income securities. Mutual funds, stocks, ETFs, closed-ended mutual funds, and Indian Depository Receipts are among the equities products available for trading (IDRs). Contracts for shares, currencies, commodities, and interest rates are all examples of derivatives. Sovereign gold bonds, corporate bonds, tri-party repo, and other debt securities are classified as fixed-income securities. Trading, clearing and settlement, exchange listing, financial education, and technical solutions are among the services provided by the NSE across all products.
The Nifty 50 index is traded as SGX Nifty and CME Nifty on the Singapore and Chicago Mercantile Exchanges, respectively.
What is a Stock Market Index?
The changes in the stock market are tracked by a stock market index. A stock index is made up of securities that are traded on a stock market. Market capitalization or industry can be used to choose stocks for the stock market index. Even though the index's components are limited, they represent the whole Indian stock market. Any change in these stocks' prices has an impact on the overall stock market index. The stock index's movement reflects market mood as well as the price changes of other financial goods, such as commodities. The BSE Sensex Index and the Nifty 50 Index are two major stock market indices in India.
What is Nifty?
Nifty, like the Sensex, is a stock market index. The National Stock Exchange is represented by Nifty. Nifty is a combination of the words National and Fifty. The Nifty 50 is also a benchmark index, consisting of the top 50 stocks traded on the National Stock Exchange. The top 50 stocks are drawn from a variety of industries, including information technology, financial services, consumer products, telecommunications, and cars. Companies must meet the following standards and criteria to be considered for inclusion in the Nifty 50:
Liquidity: The stock should have traded for 0.50 per cent or less over the last six months.
Float Adjustment: The company's market capitalisation must be at least twice the current smallest index composition when adjusted for float.
Domicile: The company should be based in India and listed on the NSE.
How Sensex is Calculated?
The Free Float Market Capitalization method is used to calculate the value of the BSE Sensex. Previously, Sensex calculated market capitalization using the weighted technique. The free-float market capitalization method, however, has been in use since September 1, 2003. It calculates the index's value using the free-float market capitalization approach after picking the 30 stocks for the index. The first stage is to calculate the free-float market capitalization of the index's 30 businesses.
The given formula is used to calculate the Sensex,
Free-Float Market Capitalization = Market Capitalization * Free-Float Factor
The free float factor refers to the percentage of a company's total shares that are easily available for trading by the general public. This also refers to the company's total number of outstanding shares. Additionally, shares issued to promoters, the government, and others that are not traded on the open market are excluded. The market capitalization of a corporation is its current market worth.
Market capitalization = Share price per share * number of shares issued by the company
Once the market capitalization of the free float has been determined. The formula below can be used to compute the value of the BSE Sensex.
The following formula is used to calculate BSE Sensex,
Value of Sensex = (Total free-float market capitalization/ Base market capitalization) * Base period index value.
The foundation period (year) for calculating the Sensex is 1978-79. The index's base value is 100. The value of the BSE Sensex can be calculated using the formula above.
The List of Companies that Form Sensex
Housing Development Finance Corporation Ltd.
Cipla Ltd.
Bharat Heavy Electricals Ltd.
State Bank Of India Ltd.
HDFC Bank Ltd.
Hero Motocorp Ltd.
Infosys Ltd.
Oil and Natural Gas Corporation Ltd.
Reliance Industries Ltd.
Tata Power Ltd.
Hindalco Industries Ltd.
Tata Steel Ltd.
Larsen & Toubro Ltd.
Mahindra & Mahindra Ltd.
Tata Motors Ltd.
Hindustan Unilever Ltd.
ITC Ltd.
Vedanta Ltd.
Wipro Ltd.
Sun Pharmaceutical Ltd.
GAIL Ltd.
ICICI Bank Ltd.
Jindal Steel & Power Ltd.
Bharti Airtel Ltd.
Maruti Suzuki Ltd.
Tata Consultancy Services Ltd.
NTPC Ltd.
DLF Ltd.
Bajaj Auto Ltd.
Coal India Ltd.
Some Role of Companies in Regards to Sensex
The Sensex is a stock index that is supposed to reflect overall market sentiment and consists of 30 important stocks. These are substantial, well-established, and financially stable businesses from many industries. An "index committee" selects and reviews the 30 companies that make up the Sensex regularly. Academics, mutual fund managers, finance journalists, independent governing board members, and other financial market participants make up this "index committee." While doing so, the committee adheres to a set of criteria.
Difference Between Sensex and Nifty.
Both the BSE Sensex and the Nifty 50 are stock market indicators that show how the market is doing. Both the Nifty and the Sensex are calculated using comparable processes. There are, however, a few key distinctions between Nifty and Sensex.
The Sensex is operated and managed by a joint venture between BSE and S&P Dow Jones Indices, a global index manager. Sensex and Nifty are a barometer for the Indian stock market. Sensex is used by investors to track the overall growth, development of specific industries, and ups and downs of the Indian economy. The index is made up of the 30 largest and most actively traded stocks on the BSE. It also offers risk management, clearing & settlement, and investor education in addition to trading. NSE is India's largest financial market. Its business model is vertically integrated.
FAQs on What is the Sensex?
1. What is Sensex Points?
Answer: Sensex points meaning is a stock market index that tracks the performance of the Indian stock market. When the Sensex rises, the prices of the underlying 30 equities rise as well. If the Sensex falls, it signifies the prices of the 30 stocks that make up the index have decreased as well.
2. What Does Sensex Indicate?
Answer: Sensex is India's benchmark stock index, which was established in 1986 and includes 30 of the BSE's largest and best-capitalized stocks. Since India's economy opened up in 1991, Sensex has been on an upward trend.
3. What Does Sensex Mean?
Answer: Stock Exchange Sensitive Index.
The Bombay Stock Exchange's stock market index, known as the Sensex, stands for 'Stock Exchange Sensitive Index.' It calculates the BSE movement. The Nifty is the National Stock Exchange's index and stands for 'National Stock Exchange Fifty.
