SENSEX Meaning – Get A to Z Details about SENSEX

SENSEX Meaning – Get Details about SENSEX & How it Works and Calculated?:

Beginner investor or already an advanced investor?

Still after reading the entire blog you will come across to learn more important aspects of SENSEX that may be you never even know.

But for every investors or the traders this is the basic knowledge that you should know about.

So, this article is on “SENSEX Meaning – Get Details about SENSEX & How it works and Calculated?”

So, this article will start like this:

First, we will learn about the SENSEX and companies that are listed on it.

After that, we will see in brief about the calculation of SENSEX and also the respective formulas.

So, let’s get started with our article and I am sure that you will also enjoy and at the same time you will be amazed by knowing in depth about the SENSEX.

SENSEX Meaning

Do you know what is SENSEX?

It is an Index.

Now, you come up with another question, right?

That what is Index now?

Index is nothing but it is a statistical aggregate measurement that measures about the changes.

Not all Index are calculated on the same measurements but these indexes calculation are different from one country to another country.

Majorly, there are two Index in Indian Stock Exchange that is SENSEX and NIFTY.

These are the index for both the stock exchanges from where all the securities are traded they are National Stock Exchange (NSE) and another one Bombay Stock Exchange (BSE).

But, in this article we will give you the knowledge only about the SENSEX.

 The Full form of SENSEX is Sensitive Index.

SENSEX index is the stock market index of Bombay Stock Exchange (BSE) and usually people call this as BSE SENSEX.

About the briefing on Bombay Stock Exchange, you can look and read on our blog that is on “Bombay Stock Exchange (BSE) India”

This stock index that is SENSEX consist of 30 Stocks of the leading companies mostly the large cap companies and it also consist every sector into this listing that are actively traded in the exchange market.

SENSEX is the reflection of the Indian Stock Market movements.

Look it’s easy to interpret the movements of the stock market like if the SENSEX is moving upward it means that to some extent the prices of the shares in the listing has gone up which makes the SENSEX to move upward.

And if the Sensex is falling down that means the prices of the shares has been fallen down approximately.

The SENSEX is the oldest stock index of the stock exchange in India.

SENSEX is overall measurement to know about the growth, development of any of the industries and also about the ups and downs of the Indian economy.

The above is the movement of the BSE SENSEX, since its inception.

Source: BSE

Let us see the list of the companies that are listed in BSE SENSEX:

All the above mentioned are the 30 Companies that are listed with BSE SENSEX.

As we have already explained the SENSEX Meaning, now let’s move to the second part that is calculation.

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Calculation of SENSEX

Previously, the SENSEX was calculated on the basis of the “Weighted Market Capitalization Method” but after that from Sept 1, 2003, the calculation method changed to “Free Float Market Capitalization”.

The performance of all the 30 stocks are the reflection of the Index.

Let us see the formula of Free Float Market Capitalization for calculating SENSEX Index.

The formula is mentioned below:

So, now you may got the thought about what free float market capitalization is?

Okay, let me explain you this first about free float market,

Free float is defined as the 1% of the total shares that are issued by the company and that are readily available in the stock market for trading purpose.

This excludes the shares that are held by the promoters, government and many institutions etc.

And now we will understand about market capitalization.

Market Capitalization defines by multiplying the price of the stock with the number of shares that are issued by the company.

As you know that SENSEX is made of 30 companies included in it and they are selected according to the criteria set by the department.

Then, all the market capitalizations of all the 30 companies are determined and also the free float market capitalization according to their formula’s respectively.

Then, the formula for SENSEX is implied that is (Total Free Float Market Capitalization/ Base Market Capitalization) * Base Index Value

The base year is considered as 1978-79 and it also changes and the base index value is determined as 100.

So, this was all about the SENSEX.

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