What is SENSEX

Sensex  is one of the large-cap indexes associated with Bombay stock exchanges of the country namely (BSE)  This is just statistical aggregate on how a change in the stock market can be measured.

What is Sensex?


The S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index), also called the BSE 30 or simply the SENSEX, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the S&P BSE SENSEX is taken as 100 on 1 April 1979 and its base year as 1978–79.

As of 25th September 2017, the full market capitalisation of S&P BSE SENSEX was about ₹54,637.0878 billion (US$837 billion) (37% of GDP) while its free-float market capitalisation was ₹30,094.2286 billion (US$461 billion). During 2008-12, Sensex 30 Index share of BSE market capitalisation fell from 49% to 25%  due to the rise of sectoral indices like BSE PSU, Bankex, BSE-Teck, etc.
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Calculation

The BSE has some reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalisation method, a variation of the market capitalisation method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. Free Floating capital implies total capitalization less Directors shareholding.  As per free float capitalisation methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalisation of a company is determined by multiplying the price of its stock by the number of shares issued by corporate actions, replacement of scrips.

What is meant by free float market capitalization?

Free float stands for the shares that are open for trading. All shares may not be free floating. Some may be pledged, some may be in the hands of the persons or bodies having controlling interest/promoters, some shares may be government holdings etc. Such locked-in shares are not considered free floating.

What is Market capitalization?

Market capitalization is the combined worth of all the stocks of different companies within the stock exchange.
The market capitalization of a company is arrived at by the product of the price of its stock and number of shares issued by the company.
This figure is multiplied by the free-float factor to determine the free-float market capitalization. The free float factor is derived from the information each company submits regarding the free floating shares. Every company has to give the information on a quarterly basis in a format given by BSE.
The free float market capitalization of all companies is summed up.
The free float market capitalisation is then divided by an index divisor to get the Sensex value. This divisor adjusts for changes in stocks and other corporate actions. The divisor is the value of the Sensex Index in the base year.

How Sensex Works – example 

Suppose the index has two companies – X and Y.
Company X has 500 shares out of which 300 are free floating or available for general public to buy and sell. The price of each share is Rs.80.
Company Y has 1000 shares out of which 700 are free floating. The price of each share is Rs. 100
Market capital of Company X = 40000
Market capital of Company Y = 100000
Free-float factor for Company X = 0.60
Free-float factor for Company Y = 0.70
Total free float market capital of the index = (40000*0.60) + (100000*0.70) = 94000
Let us assume the base year index was 5000.
Value of Index = (94000 x 100)/5000 = 1880
So the Value of the Index  is 1880.

Constituents

As of 18 December 2017, SENSEX constitutes of 31 stocks (Tata Motors has two stocks in the list):

Milestones

The following are some timeline on the rise of the SENSEX through Indian stock market history.

• 1000, 25 July 1990 – On 25 July 1990, the SENSEX touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.
• 2000, 15 January 1992 – On 15 January 1992, the SENSEX crossed the 2,000 mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and Former Prime Minister of India Dr Manmohan Singh.
• 3000, 29 February 1992 – On 29 February 1992, the SENSEX surged past the 3,000 mark in the wake of the market-friendly Budget announced by Manmohan Singh.
• 4000, 30 March 1992 – On 30 March 1992, the SENSEX crossed the 4,000 mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and SENSEX witnessed unabated selling.
• 5000, 11 October 1999 – On 11 October 1999, the SENSEX crossed the 5,000 mark, as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.
• 6000, 11 February 2000 – On 11 February 2000, the information technology boom helped the SENSEX to cross the 6,000 mark and hit an all-time high of 6,006 points. This record would stand for nearly four years, until 2 January 2004, when the SENSEX closed at 6,026.59 points.
• 7000, 21 June 2005 – On 20 June 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the SENSEX crossed 7,000 points for the first time.
• 8000, 8 September 2005 – On 8 September 2005, the Bombay Stock Exchange's benchmark 30-share index – the SENSEX – crossed the 8,000 level following brisk buying by foreign and domestic funds in early trading.
• 9000, 9 December 2005 – The SENSEX on 28 November 2005 crossed 9,000 and touched a peak of 9,000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors. However, it was on 9 December 2005 that the SENSEX first closed at over 9,000 points.
• 10,000, 7 February 2006 – The SENSEX on 6 February 2006 touched 10,003 points during mid-session. The SENSEX finally closed above the 10,000 mark on 7 February 2006.
• 20,000, 11 December 2007 – The SENSEX on 29 October 2007 crossed the 20,000 mark for the first time during intra-day trading, but closed at 19,977.67 points. However, it was on 11 December 2007 that it finally closed at a figure above 20,000 points on the back of aggressive buying by funds.
• 21,000, 5 November 2010 – The SENSEX on 8 January 2008 crossed the 21,000 mark for the first time, reaching an intra-day peak of 21,078 points, before closing at 20,873. However, it was not until 5 November 2010 that the SENSEX closed at 21,004.96, for its first close above 21,000 points. This record would stand for nearly three years, until 30 October 2013, when the SENSEX closed at 21,033.97 points.
• 19 February 2013 – SENSEX becomes S&P SENSEX as BSE ties up with Standard and Poor's to use the S&P brand for Sensex and other indices.
• 13 March 2014 - The SENSEX closes higher than the Hang Seng Index, to become the major Asian stock market index with the highest value, for the first time ever.
• 36,000, 23 January 2018 - The SENSEX closed at 36,139.98, for its first close above the 36,000 level.

			Record values Major falls On the following dates, the SENSEX index suffered major single-day falls
			Disclaimer : All information has taken from https://en.wikipedia.org and www.tflguide.com. Also Please make sure you have understated the stock market risk before investment. This has given for information purpose only.