What is Sensex – How is Sensex Calculated

Sensex is a shortened form of the Bombay Exchange Sensitive Index (Sensex) – the benchmark index of the Bombay Stock Exchange (BSE). When we say “Sensex” that means it is collection of  the 30 largest and most actively-traded stocks on the BSE.

Why Is Sensex Important

The SENSEX is an indicator of the stocks in the BSE that show whether the stocks are going up, or going down.

The SENSEX is nothing but the short form of the BSE-Sensitive Index, which is a “Market Capitalization-Weighted” index of 30 stocks representing a sample of large, well-established and financially sound companies.

This index is widely used to measure the performance of the Indian stock markets which is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Mumbai Stock Exchange.

The main objective of SENSEX is that it acts as the benchmark index of the Indian Capital Markets. It has wide acceptance among individual investors, institutional investors, foreign investors and fund managers.

The objectives of the index are:

• To measure market movements.
• Work as a Benchmark for funds performance etc.

How is Sensex Calculated

The value of SENSEX is calculated by taking into consideration the stock prices of 30 different BSE listed companies. It technique which is used is called “free-float market capitalization” method.

The market capitalization of a company is decided by multiplying the price of its stock by the number of shares issued by the company.

This market capitalization is further multiplied by the free-float factor to conclude the free-float market capitalization.

This day the Sensex makes up of the following corporations:

Company name and business associated with it.