BSE Sensex Today

Initially, when the index was launched in 1986, the method used for calculating Sensex was the full market capitalisation method. As a result, all the shares, whether available for active trading or not, were included. From September 1st, 2003, onwards, the method was changed to float-adjusted market capitalisation.

So, the Sensex value is calculated on a float-adjusted basis. What does float-adjusted mean? It simply means that the market capitalisation of a company is multiplied by the float factor, i.e., the percentage of total shares available for free trading in the stock markets. Free float excludes the shares held by employees, promoters, government, etc. that are not readily traded.

For example, assume Company X has a total number of issued shares of ₹10 lakh in the market. Out of these shares, only 70% of the shares are freely tradeable on the stock exchange. Suppose the market price of a share is ₹1,000. This is how Sensex will calculate the free-float market capitalisation of the company:

To calculate the value of Sensex today live, the free-float market capitalisation of all the 30 companies is added. Then the value is adjusted with the base index value of 1978-79. The base value of the BSE Sensex in 1979 was 100. So, the formula used is:

Value of Sensex = (Total free float market capitalisation/ Base free float market capitalisation) * Base period index value

Where,

Base period index value is 100, from 1978-79

The constituents of Sensex are also changed every 6 months in June and December based on their average free-float market capitalisation and average traded value during the last 6 months.

Selection Criteria for Scrips on Sensex

The companies in BSE Sensex are added or deleted semiannually in June and December when the index is reviewed. But what are the criteria for the selection of these 30 companies? Take a note:

1. The companies should be listed on the BSE (for at least 6 months).
2. The companies must be traded daily on BSE during the last 6 months, i.e., high liquidity.
3. The companies should have a large or mega-market capitalisation. Here, large market cap means having market capitalisation between ₹7,000 crore and ₹20,000 crore and mega-cap means having market cap of over ₹20,000 crore.
4. Revenue of these companies must be generated from the core activities.

How To Invest in Sensex Stocks?

You can invest in the Sensex in the following ways:

1. You can invest in an ETF or an index fund that tracks the Sensex, i.e. it invests in a similar pattern in the same set of stocks as the Sensex. This will allow you to gain directly from the index’s growth.
2. You can trade futures and options which have the Sensex as the underlying asset. The changes in the value of the Sensex will determine the outcome of the future or the option.
3. You can make a list of all the stocks that come under the Sensex and buy those stocks in the same proportion as it is in the Sensex.

What are the Benefits of Investing in the Sensex?

The following are some of the important benefits of investing in Sensex:

1. Sensex stocks include shares of 30 of the largest companies in India. These companies have enough market capitalisation and market power to help them survive at times of crisis. The index itself has grown by a CAGR of roughly 16% between 1979 and 2022, which is a great number compared to many mutual funds.
2. Futures and Options on a major index such as the Sensex can have a high trading volume. This reduces the level of risk that may be involved in F&O trading as you can now sell the derivative contracts held by you more easily.

History of the Sensex

The Sensex was first published on January 1st, 1986. The base value of the SENSEX was taken as 100 on April 1st, 1979 and its base year as 1978–79.

The term Sensex was coined by Deepak Mohoni, a stock market analyst in 1989. It is a portmanteau of the words Sensitive and Index.

Here is a short list of the major milestones of the Sensex since its inception:

• On October 11th, 1999, the SENSEX crossed the 5,000 mark, at the time of the results of the 13th Lok Sabha election.
• On June 20th, 2005, the news of the settlement between the Ambani brothers boosted the index. The SENSEX crossed 7,000 points for the first time.
• The Sensex on February 6th, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10,000 mark on February 7th, 2006.
• The Sensex on October 29th, 2007 crossed the 20,000 mark.
• SENSEX becomes S&P SENSEX as BSE ties up with Standard and Poor’s.
• The Sensex crossed a record 25,000 level for the first time, on May 16th, 2014 after the election results.
• On March 4th, 2015, the Sensex breached the 30,000 mark following steps taken by the Reserve Bank of India in cutting the repo rates.
• The Sensex crossed 40,000 on May 23rd, 2019 for the first time as the 2019 Loksabha Election results were getting published.
• The Sensex crossed the 60,000 mark on September 24th, 2021.

Factors Affecting the Sensex Index

The following are some of the key factors affecting the sensex Index:

1. RBI’s monetary policy – Tweaks made by the RBI in order to control inflation in the economy have an impact on the overall economy, which is reflected in the changes in the Sensex.
2. Government policies – Government policies designed to boost the growth rate and investment in the economy have a positive impact on the Sensex.
3. FIIs and DIIs – Changes in the level of investment by foreign institutional investors (FIIs) and domestic institutional investors (DIIs) may help boost the Sensex due to the increased cash flow into the economy.
4. Black swan events – Rare but extreme events, such as COVID or the Russian-Ukraine war affect economies across the world, including India. Such economic changes are reflected in the changes in the Sensex too. However, other major events exist that could boost the index as well, such as a stable government winning the election or an early monsoon season.