BSE Sensex

The Bombay Stock Exchange

BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30

stocks that started January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in
India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on
the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of
the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.

At a regular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to be
sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a
variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares
that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such
as those held by promoters, government and strategic investors. [1].

Initially, the index was calculated based on the ‘full market capitalization’ method. However this was shifted to
the free float method with effect from September 1, 2003. Globally, the free float market capitalization is
regarded as the industry best practice.

As per free float capitalization 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 Capitalization of a company is determined
by multiplying the price of its stock by the number of shares issued by the company. This Market capitalization
is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also
referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for
trading.

The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by
a number called Index divisor.The Divisor is the only link to original base period value of the Sensex. It keeps
the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate
actions, replacement of scrips, etc.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979
onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to
roughly 9% per annum after compensating for inflation.[2] [edit]Sensex milestones
Here is a timeline on the rise of the Sensex through Indian stock market history.

 1000, July 25, 1990 - On July 25, 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, January 15, 1992 - On January 15, 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 current Prime Minister
Dr Manmohan Singh.

 3000, February 29, 1992 - On February 29, 1992, the Sensex surged past the
3000 mark in the wake of the market-friendly Budget announced by
Manmohan Singh.

 4000, March 30, 1992 - On March 30, 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 theHarshad Mehta scam hit the markets and Sensex
witnessed unabated selling.

 5000, October 11, 1999 - On October 8, 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, February 11, 2000 - On February 11, 2000, the information technology
boom helped the Sensex to cross the 6,000-mark and hit and all time high of
6,006.
 7000, June 21, 2005 - On June 20, 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, September 8, 2005 - On September 8, 2005, the Bombay Stock

Exchange's benchmark 30-share index – the Sensex - crossed the 8000 level
following brisk buying by foreign and domestic funds in early trading.

 9000, December 9, 2005 - The Sensex on November 28, 2005 crossed 9000
to touch 9000.32 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.

 10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003

points during mid-session. The Sensex finally closed above the 10,000-mark
on February 7, 2006.

 11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and
touched a peak of 11,001 points during mid-session at the Bombay Stock
Exchange for the first time. However, it was on March 27, 2006 that the
Sensex first closed at over 11,000 points.

 12,000, April 20, 2006 - The Sensex on April 20, 2006 crossed 12,000 and
touched a peak of 12,004 points during mid-session at the Bombay Stock
Exchange for the first time.

 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000
for the first time. It touched a peak of 13,039.36 and finally closed at
13,024.26.

 14000, December 5, 2006 - The Sensex on December 5, 2006 crossed

14,000.

 15,000, July 6, 2007 - The Sensex on July 6, 2007 crossed 15,000 mark.

 16,000, September 19, 2007 - The Sensex on September 19, 2007 crossed
the 16,000 mark.
  17,000, September 26, 2007 - The Sensex on September 26, 2007 crossed
the 17,000 mark for the first time.

 18,000, October 9, 2007 - The Sensex on October 9, 2007 crossed the

18,000 mark for the first time.

 19,000, October 15, 2007 - The Sensex on October 15, 2007 crossed the
19,000 mark for the first time.

 20,000, October 29, 2007 - The Sensex on October 29, 2007 crossed the
20,000 mark for the first time.

 21,000, Jan 08, 2008 - The Sensex on January 8, 2008 touched all time peak
of 21078 before closing at 20873.[3]
[edit]May 2006
On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading, leading to the suspension of
trading for the first time since May 17, 2004. The volatility of the Sensex had caused investors to lose Rs
6 lakh  crore (US$131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram,
made an unscheduled press statement when trading was suspended to assure investors that nothing was
wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading
resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of
India (SEBI), the Sensex managed to move up 700 points, still 450 points in the red.

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time
high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the
economy and reports that India's manufacturing sector grew by 11.1% in August 2006.

 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000
and still riding high at the Bombay Stock Exchange for the first time. It took
135 days to reach 13,000 from 12,000. And 124 days to reach 13,000 from
12,500. On October 30, 2006 it touched a peak of 13,039.36 & closed at
13,024.26.

 14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed

14,000 and touched a peak of 14028 at 9.58AM(IST) while opening for the
day December 5, 2006.
  15,000, July 6, 2007- The Sensex on July 6, 2007 crossed another milestone
and reached a magic figure of 15,000. it took almost 7 month and 1 day to
touch such a historic milestone. Coincidentally, Sachin Tendulkar achieved
the same mark (15000 runs in international cricket) around the same time. (A
refrain at that time was, "Sachin, make runs, so that the Sensex rises too!")
[edit]May 2009
On May 18, 2009, the sensex surged 2110.79 points from the previous closing of 12174.42 this leading to the
suspension of trade for the whole day.This event created history in Dalal Street, by being the first ever time that
trade had been suspended for an increase in value. This rally is primarily due to the victory of the UPA in the
15th General elections. Trading was open for that day only for 55 seconds. Initially 25 seconds and 30 seconds
market reached upper freeze limit twice in that day itself.

[edit]Effects of the Subprime crisis in the U.S

On Monday July 23, 2007, the Sensex touched a new hight of 15,733 points. On July 27, 2007 the Sensex
witnessed a huge correction because of selling by Foreign Institutional Investor (FII)s and global cues to come
back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE
Sensex fell by 615 points in a single day on Wednesday August 1, 2007.

 16,000, September 19, 2007- The Sensex (Sensitivity Index) on September

19, 2007 crossed the 16,000 mark and reached a historic peak of 16322 while
closing. The bull hits because of the rate cut of 50 bit/s in the discount rate by
the Fed chief Ben Bernanke on September 26, 2007 crossed the 17,000 mark
for the first time, creating a record for the second fastest 1000 point gain in
just 5 trading sessions. It failed however to sustain the momentum and closed
below 17000. The Sensex closed above 17000 for the first time on the
following day. Reliance group has been the main contributor in this bull run,
contributing 256 points. This also helped Mukesh Ambani's net worth to grow
to over $50 billion or Rs.2 trillion. It was also during this record bull run that the
Sensex for the first time zoomed ahead of the Nikkei of Japan.

 18,000, October 9, 2007- The Sensex crossed the 18k mark for the first time
on October 9, 2007. The journey from 17k to 18k took just 8 trading sessions
which is the third fastest 1000 point rise in the history of the sensex. The
sensex closed at 18,280 at the end of day. This 788 point gain on October 9
was the second biggest single day absolute gains.
  19,000, October 15, 2007- The Sensex crossed the 19k mark for the first time
on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the
fastest 1000 points rally ever and also the 640 point rally was the second
highest single day rally in absolute terms. This made it a record 3000 point
rally in 17 trading sessions overall.

Therefore the US Subprime crisis has a great effect even on INDIA.gold cross the psycological barrier.

[edit]Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory
notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it
was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might
therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on
the following day (October 17, 2007). Within a minute of opening trade, the Sensex crashed by 1744 points or
about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to
automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the
meantime, that the government was not against FIIs and was not immediately banning PNs. After the market
opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last
day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the Sensex tumbled by 717.43
points — 3.83 per cent — to 17998.39. The slide continued the next day when the Sensex fell 438.41 points to
settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the
day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a
879-point gain on October 23, thus signalling the end of the PN crisis.

 20,000, October 29, 2007- The Sensex crossed the 20k mark for the first time
with a massive 734.5 point gain but closed below the 20k mark. It took 11
days to reach from 19k to 20k. The journey of the last 10,000 points was
covered in just 869 sessions as against 7,297 sessions taken to touch the
10,000 mark from 1,000 levels. In 2007 alone, there were six 1,000-point
rallies for the Sensex.

 21,000, January 8, 2008 Business Standard

[edit]January 2008
In the third week of January 2008, the Sensex experienced huge falls along with other markets around the
world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the end of the session. The
Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as
investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in barely a
minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55
AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after
reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875
points.[4]

Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to 16,730 by
Tuesday evening or a two day fall of 13.9%. [4]

 9,975, October 17, 2008 - Sensex crashes below the psychological 5 figure
mark of 10K, following extremely negative global financial indications in US
and other countries. Exactly one year back in October 2007, Sensex had gone
past the 20K mark.

 8701.07, October 24, 2008 lost 10.96% of its value on the intra day trade,
the 3rd highest loss for a one day period in its history
[edit]Major crashes since 2000
[edit]May 2006
On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading, leading to the suspension of
trading for the first time since May 17, 2004. The volatility of the Sensex had caused investors to lose Rs 6 lakh
crore ($131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an
unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the
fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the
reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the Sensex
managed to move up 700 points, still 450 points in the red.

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time
high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the
economy and reports that India's manufacturing sector grew by 11.1% in August 2006.

[edit]Effects of the subprime crisis in the U.S.

On July 23, 2007, the Sensex touched a new high of 15,733 points. On July 27, 2007 the Sensex witnessed a
huge correction because of selling by Foreign Institutional Investors and global cues to come back to 15,160
points by noon. Following global cues and heavy selling in the international markets, the BSE Sensex fell by
615 points in a single day on August 1, 2007.

[edit]Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory
notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it
was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might
therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on
the following day (October 17, 2007). Within a minute of opening trade, the Sensex crashed by 1744 points or
about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to
automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the
meantime, that the government was not against FIIs and was not immediately banning PNs. After the market
opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last
day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the Sensex tumbled by 717.43
points — 3.83 per cent — to 17998.39. The slide continued the next day when the Sensex fell 438.41 points to
settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the
day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a
879-point gain on October 23, thus signalling the end of the PN crisis.

[edit]January 2008
In the third week of January 2008, the Sensex experienced huge falls along with other markets around the
world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the end of the session. The
Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as
investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in barely a
minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55
AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after
reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875
points.[4]
Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to 16,730 by
Tuesday evening or a two day fall of 13.9%. [4]

Sensex falls

Some major single-day falls of the Sensex have occurred on the following dates [1]:

1. January 21, 2008 --- 1,408.35 points

2. Oct 24, 2008---1070.63 points

3. March 17, 2008 --- 951.03 points

4. July 6, 2009 --- 870 points

5. January 22, 2008 --- 857 points

6. February 11, 2008 --- 833.98 points

7. May 18, 2006 --- 826 points

8. October 10, 2008 --- 800.10 points

9. March 13, 2008 --- 770.63 points

10. December 17, 2007 --- 769.48 points

11. January 7, 2009 --- 749.05 points

12. March 31, 2007 --- 726.85 points

13. October 6, 2008 --- 724.62 points

14. October 17, 2007 --- 717.43 points

15. September 15, 2008 --- 710.00 points

16. January 18, 2007 --- 687.82 points

17. November 21, 2007 --- 678.18 points

18. August 16, 2007 --- 642.70 points

19. August 17, 2009 --- 626.71 points

20. June 27, 2008 --- 600.00 points

[edit]References

1. ^ BSE Sensex weighting methodology via Wikinvest

2. ^ Handbook of Statistics on Indian Economy
3. ^ http://in.rediff.com/money/2008/jan/08sensex.htm
4. ^ a b c d rediff Business Bureau (2008-01-21). "The 10 biggest falls in Sensex
history". MarketWatch. Retrieved 2008-01-23.

5. ^ List of sensex stocks

 6. ^ http://www.7moneywonder.com
[edit]External links

 BSE Sensex profile at Wikinvest