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The Indian stock market is definitely a promising enterprise. The Indian stock exchange comprises two major indices, the Sensex and the Nifty. The Sensex, which includes 50 firms listed on the BSE, provides time series data from April 1979 onwards. The Nifty, on the other hand, includes firms listed on the NSE and provides time series data from July 1990 onwards.
The BSE and NSE are the two major stock exchanges in India. While BSE is the older one, NSE is the larger one at the moment. Both of them follow the same trading mechanism, trading hours and settlement process. This makes it easier for a trader to operate the two and work with them.
The BSE classifies companies on the basis of their relative market capitalisations. The companies are divided into Large-Cap, Mid-Cap and Small-Cap. The segments of the market capitalisation are decided on the basis of the 80-15-5 rule. The companies which cover 80% of the total market cap of all companies are listed as LargeCap companies. As of now, there are 100 Large-Cap companies.
The S&P BSE LARGECAP index is designed to represent 70% of the total market cap of the S&P BSE ALLCAP. The value of this index changes with the change in the BSE LARGECAP share price.
Investing in BSE LARGECAP companies ensures better returns as these companies have better market capitalisation. This index is, therefore, very essential to ensure that an investor makes an informed choice while investing in the company and knows about the returns offered. The stocks of the companies listed here are the most traded in the stock market.
S&P BSE LARGECAP companies are calculated and listed on the basis of the free-float market capitalisation method.
A free-float market capitalisation method is very different from a weighted market capitalisation method that was followed earlier. A free-float market capitalisation means that only the shares that are available in the market for trading at that point in time are included in the calculation for the index. The rest that is held by the employees of the company, government, etc., are not available for trading and are to be excluded while making the calculation.
Primary criteria for choosing the 30 stocks that comprise the Sensex for LARGECAP index are-
The free-float market capitalisation can be calculated by the formula-
Free float market capitalisation= Market capitalisation * Free Float Factor
Here, market capitalisation stands for the market value of the company. The free float factor, on the other hand, is the percentage of shares within the company that are available for trading.
For calculating the BSE LARGECAP share price, the following formula can be used-
BSE LARGECAP Share Price =
Total Free-Float Market Capitalisation x Base Index Value / Base Market Capitalisation
Here, the total free-float market capitalisation of 70% of the total market cap of S&P BSE ALLCAP is taken into consideration. These values are revised regularly and are very dynamic, so make sure that you check the most recent list of such stocks.