The stock market expert Mr. Deepak Mohoni introduced the term Sensex which is a combination of Sensitive and Index. Sensex is a market index that constitutes the top 30 companies listed under the Bombay Stock Exchange (BSE). These stocks are the popular and most actively traded stock on the BSE.
It is one of the oldest indexes in India which is considered an important tool of reflection of the Indian economy. Therefore, stock research analysts prefer it to understand the overall growth, development in industry, country’s stock market trend.
Eligibility criteria for Sensex index listing
The below-mention is the eligibility criteria for getting listed on the sensex Index-
- The company must be registered on the BSE.
- The company should be a large to mega-cap stock.
- The stocks of the respective company are highly liquid
- The revenue generated by the company is from core activities
Moreover, Sensex reflects the movements in the Indian stock market. If the value increases, it denotes the prices of the underlying stocks have increased. However, if the value has decreased, it reflects the prices of the underlying stocks have decreased.
Calculation Methodology for Sensex
Bombay Stock Exchange Sensex can be calculated by using the Free Float Market Capitalization method. Although, in its earlier phase, it is calculated by using the weighted market capitalization method. However, the free-float market capitalization method has been used since 1 September 2003.
Step 1: Determine the free-float market capitalization of 30 companies that form the index.
Free Float Market Capitalization = Market Cap. X Free Float Factor
[Free Float factor = percentage of total shares a company issues and that are readily available to the common public to trade OR the total outstanding shares of the company]
Market capitalization = Share price per share X number of shares issued by the company
Step 2: After that, the value of sensex is calculated which is mentioned in below paragraph.
How Sensex is calculated?
- It comprises 30 companies that are selected according to the set criteria and their performance.
- The market capitalization of all 30 companies is determined.
- The free-float market capitalization for all 30 companies is done.
- The calculated free-float market capitalization is summed up to get a total of all free-float market capitalization.
- Value of Sensex = (Total free-float market cap. / Base market cap.) X Base period index value.
- The base year for calculation is 1978-79. According to BSE Rs. 2501.24 crore is to be used as the base market capitalization.
- The base value index is 100.
Hence,
Sensex = free float market cap. of 30 selected companies / 25041.24 crores X 100
Sensex Index Companies
The list of 30 companies of Sensex is as:
| S.No. | Name | Industry | Weight |
| 1. | Reliance Industries Ltd. | Integrated Oil & Gas | 11.99% |
| 2. | HDFC Bank Ltd. | Banks | 11.84% |
| 3. | Infosys Ltd. | IT Consulting & Software | 9.06% |
| 4. | Housing Development Finance Corporation Ltd. | Housing Finance | 8.30% |
| 5. | ICICI Bank Ltd. | Banks | 7.37% |
| 6. | Tata Consultancy Services Ltd. | IT Consulting & Software | 5.76% |
| 7. | Kotak Mahindra Bank Ltd. | Banks | 4.88% |
| 8. | Hindustan Unilever Ltd. | Personal Products | 3.75% |
| 9. | ITC Ltd. | Cigarettes,Tobacco Products | 3.49% |
| 10. | AXIS Bank Ltd. | Banks | 3.35% |
| 11. | Larsen & Toubro Ltd. | Construction & Engineering | 3.13% |
| 12. | Bajaj Finance Ltd. | Finance (including NBFCs) | 2.63% |
| 13. | State Bank of India | Banks | 2.59% |
| 14. | Bharti Airtel Ltd. | Telecom Services | 2.31% |
| 15. | Asian Paints Ltd. | Furniture,Furnishing,Paints | 1.97% |
| 16. | HCL Technologies Ltd. | IT Consulting & Software | 1.89% |
| 17. | Maruti Suzuki India Ltd. | Cars & Utility Vehicles | 1.72% |
| 18. | Mahindra & Mahindra Ltd. | Cars & Utility Vehicles | 1.48% |
| 19. | UltraTech Cement Ltd. | Cement & Cement Products | 1.40% |
| 20. | Sun Pharmaceutical Industries Ltd. | Pharmaceuticals | 1.16% |
| 21. | Tech Mahindra Ltd. | IT Consulting & Software | 1.11% |
| 22. | Titan Company Ltd. | Other Apparels & Accessories | 1.11% |
| 23. | Nestle India Ltd. | Nestle India Ltd. | 1.07% |
| 24. | Bajaj Finserv | Finance (including NBFCs) | 1.04% |
| 25. | IndusInd Bank Ltd. | Banks | 1.03% |
| 26. | POWERGRID | Electric Utilities | 1.03% |
| 27. | Tata Steel Ltd. | Iron & Steel/Interm.Products | 1.01% |
| 28. | NTPC Ltd. | Electric Utilities | 0.94% |
| 28. | Bajaj Auto Ltd. | 2/3 Wheelers | 0.86% |
| 30. | Oil & Natural Gas Corporation Ltd. | Exploration & Production | 0.73% |
Difference between Sensex and Nifty
The some basic differences between Nifty and Sensex are as:
| Basis | BSE Sensex | Nifty 50 |
| Full-Form | Sensex is derived from the Sensitive Index | Nifty 50 is derived from National Fifty |
| Owned by | BSE Sensex is an index owned and managed by BSE (Bombay Stock Exchange) | Nifty 50 is owned and managed by NSE (National Stock Exchange) Indices. |
| Total Companies | It comprises a total of 30 companies only. | Whereas, Nifty comprises 50 companies. |
| Base year and value | The base year of Sensex is 1978-79, and the base value is 100 | The base year of Nifty is 1995, and 1000 is the base value |
Some Major Milestones
- July 9, 1875: The Native Share & Stock Broker’s Association was formed
- January 2, 1986: S&P BSE SENSEX, the country’s first equity index was launched
- July 25, 1990: It touches the four-digit figure and closes at 1,001 due to good monsoon which upbeat corporate results.
- October 11, 1999: It crossed the 5,000 due to boom in the Information Technology sector
- February 6, 2006: The BSE index touch 10,003 points during mid-session and due to a sharp run in commodity pricing.
- October 29, 2007: It crossed the 20,000 mark due to aggressive retail buying and FII participation.
- 2008-09: The subprime crisis has negatively impacted the economy and investor sentiment due to which market fall.
- 2014: The benchmark index bounced back to hit a new high of 25,000 after the NDA formed a stable government.
- January 2015: It spurred to 30,000 backed by global liquidity provided by central banks of major economies.
- January 2018: It touched a record high of 36,000 on the back of IMF’s prediction about India’s growth, which boosted investor sentiment.
- August 2018: It crossed the 38,000 marks on account of India’s economic growth expectations.
- 23 May 2019: It breached its 40,000 marks for the first time.
In conclusion, it plays a vital role in regulating the financial market of India. Although, it is one of the oldest indexes in India and an important tool of reflection of the Indian economy. It helps to understand the overall growth, development in industry, country’s stock market trend.
Frequently Asked Questions
Sensex and Nifty are the stock indices of the Bombay Stock Exchange and National Stock Exchange respectively. As nifty holds 50 stocks which is much broader. Whereas, Sensex only holds the top 30 stocks. So, when the market is bullish, the top stock companies perform better which pushes Sensex higher. Due to which Nifty is considered better than Sensex.
Sensex and Nifty are both benchmark indices, which hold stocks and indicates overall stock market performance. Nifty is calculated on top 50 stock trading in National Stock Exchange. On the other hand, Sensex comprises the top 30 large-cap companies on the Bombay Stock Exchange.
Value of Sensex = Value of Sensex = (Total free float market capitalization/ Base market capitalization) * Base period index value.
Moreover, the base year for Sensex calculation is 1978-79. The base value index is 100.
There is no partiality in the selection of Sensex companies. As of now, more than 5000+ companies are listed on BSE. The selection is done based on companies’ performance and valuation.
