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While the BSE calculates many comprehensive indices that comprise stocks from various sectors, they help understand the overall picture of the market movements. On the other hand, individual sectors like Power, Oil & Gas, etc., greatly influence global economic activities. Hence, it is also important to study the effects of such sectors individually.
The BSE thus launched the BSE Power Index in November 2007 to value the top companies from the power sector that cumulatively hold more than 90% of the total market cap of the Power Sector in India. The stocks in S&P BSE Power are selected from the BSE 500 index.
As the name suggests, the Power sector relates to the companies involved in generating and distributing electricity or manufacturing of heavy electrical equipment. Even the electrical utilities are considered a part of the S&P BSE Power index. Some major examples of Indian companies involved in the Power sector are Adani Transmission Limited, Power Grid Corporation of India Limited, NTPC Limited, etc.
The BSE Power share price is calculated using the free-float market cap weighted method. This index comprises stocks that are part of the BSE 500 index and holds 90% (+/- 2%) of the total market cap of the Power Sector in India.
The value of BSE Power is calculated in real-time and is published in 2 denominations, INR & USD. The rebalancing of the index is conducted semiannually in June & December. By studying the movement in BSE Power Share price, investors and analysts can predict the industry and business trends that can help them forecast the stock market.
Here are the prerequisites for a stock to be included in the BSE Power index:
After selecting the stocks to be listed on the BSE Power Index, the next step is to rank them based on the free-float market cap. According to this method, only those available stocks to be traded freely on the stock exchange are considered. This means Government owned shares or ESOPs restricted from free trading are excluded while calculating the BSE Power share price.
Here’s an example showing how the free-float market capitalization of a company is calculated.
Ex: Assuming that Company A has 1 lakh equity shares issued in the market of which 70% are freely tradeable. Here’s how the free-float market cap will be calculated, given the market price per share of Company A is INR 1000.
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At present, there are 11 constituents in the BSE Power index. Together these stocks hold 90% of India’s total market capitalization of the Power Sector companies. Hence, these companies hold a strong influence on the entire Power Sector. After calculating the individual free-float market cap of all the index constituents, the figures are added for all the 11 constituents.
The formula to calculate the value of the BSE Power index:
| BSE Power Share Price = Total Free-Float Market Capitalisation x Index Value for the Base Year / Market Capitalisation for the Base Year |