This post was most recently updated on December 17th, 2022
The Sensex, also known as the BSE Sensex or the S&P BSE Sensex, is a stock market index in India that represents the performance of the top 30 companies listed on the Bombay Stock Exchange (BSE). It is considered a benchmark index for the Indian stock market and is widely followed by investors, analysts, and the media. In This article let’s understand what is sensex and understand more about how it functions.
The Sensex was first introduced in 1986 and is calculated using free float market capitalization weighted methodology, where the level of the index reflects the total market value of all the stocks in the index relative to a particular base period. The base period for the Sensex is 1978-79, and the index level is calculated with a base value of 100.
The companies included in the Sensex are selected based on their market capitalization, liquidity, and sector representation. The index is reviewed and rebalanced periodically to ensure that it continues to accurately reflect the performance of the top 30 companies on the BSE.
The Sensex is considered a leading indicator of the Indian stock market and is widely used as a barometer of the country’s economic health. It is often used by investors as a benchmark for the performance of their portfolios, and it is also used by analysts and the media to gauge the overall performance of the stock market.
What is Sensex Index?
The Sensex consists of 30 stocks that are part of the index. Like Sensex, BSE has a lot of other indexes listed on the BSE stock exchange.
What is the history of Sensex?
Here is a brief history of the Sensex:
- 1986: The Sensex was first introduced on January 1, 1986, with a base value of 100 and a base period of 1978-79. The index was initially composed of 30 companies selected based on their market capitalization, liquidity, and sector representation.
- 1992: The Sensex witnessed a significant increase in value in the early 1990s, due to the liberalization of the Indian economy and the opening up of the stock market to foreign investors. The index reached its all-time high of 6,357 on January 31, 1992.
- 1997: The Sensex faced a significant downturn in 1997 due to the Asian financial crisis, which led to a sharp drop in the value of the index. The index reached its all-time low of 1,287 on November 21, 1997.
- 2002: The Sensex recovered from its 1997 low and reached its all-time high of 21,206 on January 10, 2008. The index was fueled by strong economic growth and an influx of foreign investment.
- 2020: The Sensex faced a significant downturn in 2020 due to the economic impact of the COVID-19 pandemic. The index reached its all-time low of 25,638 on March 23, 2020, but recovered significantly in the following months.
What are the criteria for the stocks to be part of Sensex?
There are a few criteria for a stock to be part of BSE Sensex, they are
- Stocks should be listed for a minimum of 6 months on the BSE stock exchange
- The stock should have traded for all the trading days for the last 6 months
- If the stock has a DVR then the DVR is aggregated with the company’s common stock and index construction is done based on the aggregated company
- Stocks meeting the above criteria then qualify for the selection and then the top 75 companies out of the list are identified based on their average six-month float-adjusted market capitalization.
- All companies meeting the eligibility factors are ranked again based on their average six-month total market capitalization. The top 75 are identified.
- All companies identified based on steps 4 and 5 are then combined and sorted based on their annualized traded value. Companies with a cumulative annualized traded value greater than 98% are excluded.
- The remaining companies are then sorted by average six-month float-adjusted market capitalization. Companies with a weight of less than 0.5% are excluded.
- The remaining companies from step 7 are then ranked based on their average six-month float-adjusted market capitalization, and are selected for index inclusion according to the following rules:
a. The top 21 companies (whether a current index constituent or not) are selected for index inclusion with no sector consideration.
b. Existing constituents ranked 22 – 39 are selected in order of highest rank until the target constituent count of 30 is reached.
c. If after this step the target constituent count is not achieved, then non-constituents ranked 22 – 30 are selected by giving preference to those companies whose sector is underrepresented in the index as compared to the sector representation in the S&P BSE All Cap.
d. If after this step, the target constituent count is still not achieved, non-constituents are selected in order of highest rank until the target constituent count is reached.
What is Sensex company list and their weightage
Below are the Sensex company list and their approximate weightage in 2022
|KOTAK MAHINDRA BANK||BANKING||1,841.10||3.9|
|DR. REDDYS LAB||PHARMA||4,309.30||0.8|
Sensex Historical performance
The below picture depicts the historical performance of Sensex since 1980:-
FAQs on what is Sensex
What is the importance of BSE Sensex in Indian stock market?
Sensex is the oldest index in the Indian stock market. When people look at historic returns, they first look at the returns of Sensex from 1980. The Sensex Index has given tremendous returns since 1980. In 1980, Sensex was close to 150 and in 2020 Sensex is near 40000. This gives an indication of how in the long run investors can make a lot of money from the stock market if they just stick to the investments in the long run!
Is Sensex a listed company?
Many people get confused between Sensex and BSE. Sensex is an Index that is part of BSE. BSE is a listed company in NSE which manages the Sensex index.
How to invest in Sensex Index?
investors can directly in ETFs/Index funds which in turn track the Sensex index. Few of the ETFs/Index funds are as below:-
HDFC Index Sensex
HDFC Sensex ETF
ICICI Prudential Sensex ETF
ICICI Prudential Sensex Index Fund
IDFC Sensex ETF
Kotak Sensex ETF
LIC MF Exchange Traded Fund – Sensex
LIC MF Index Sensex
Nippon India ETF Sensex
Nippon India ETF Sensex Next 50
Nippon India Index Sensex
SBI ETF Sensex
SBI ETF Sensex Next 50
Tata Index Sensex
UTI Sensex Exchange Traded Fund
UTI S&P BSE Sensex Next 50 ETF
What is the difference between Sensex and Nifty?
Sensex and Nifty are 2 different stock indexes which are created by 2 different stock exchanges. Sensex is created by BSE which consists of 30 stocks and Nifty a.k.a nifty 50 is created by NSE consists of 50 stocks in its Index.