The Bombay Stock Exchange (BSE) Sensex holds a significant position in the Indian financial landscape, serving as a barometer of the country’s economic health.
Established in 1986, the BSE Sensex is a benchmark index that tracks the performance of the top 30 companies listed on the Bombay Stock Exchange.
What is the BSE Sensex?
The BSE Sensex, often referred to as simply the Sensex, is a market-weighted index that represents the performance of the largest and most actively traded stocks on the Bombay Stock Exchange.
It is composed of 30 well-established and financially robust companies across various sectors, including banking, information technology, automobile, and energy.
These companies are known as the “blue-chip” stocks and are considered the bellwethers of the Indian stock market.
Calculation Methodology:
The BSE Sensex is calculated using a free-float market capitalization-weighted methodology.
Market capitalization refers to the total value of a company’s outstanding shares in the market.
However, unlike traditional market capitalization-weighted indices, the Sensex uses the free-float market capitalization concept.
Free-float market capitalization takes into account only the shares available for trading in the open market, excluding shares held by promoters, governments, and strategic investors.
This method ensures that the index reflects the true liquidity of the listed companies. The index is regularly reviewed and updated to maintain its relevance in the dynamic market environment.
