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What is Sensex in Share Market

What is Sensex in Share Market

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Published by: Thomas Kevin on Feb 23, 2011
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what is sensex in share market
Sensex refers to "Sensitivity Index" and is generally associated with the stock market indices.There are currently two major stock exchanges in India, The Bombay Stock exchange (BSE) andThe National Stock Exchange (NSE).  The BSE Sensex is an indicator of all the major companies of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the companies under theBSE Sensex (30 companies) have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down. Today the BSE Sensex constitutes of the following companies: Company Name (Industry)1.
 
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CC (Cement - Major)2.
 
Bharti
A
irtel (Telecommunications - Service)3.
 
BHEL (Engineering - Heavy)4.
 
DLF (Construction & Contracting - Real Estate)5.
 
Grasim (Diversified)6.
 
HDFC Bank (Banks - Private Sector)7.
 
HDFC (Finance - Housing)8.
 
Hindalco (
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luminium)9.
 
Hindustan Unilever Ltd (Personal Care)10.
 
ICICI Bank (Banks - Private Sector)11.
 
Infosys Ltd (Computers - Software)12.
 
ITC Ltd(Cigarettes)13.
 
Jaiprakash
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ssociates (Construction, Real Estate, Cement etc.)14.
 
Larsen & Toubro (Construction, Diversified)15.
 
Mahindra and Mahindra (
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uto - Cars & Jeeps)16.
 
Maruti Suzuki (
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uto - Cars & Jeeps)17.
 
NTPC (Power - Generation/Distribution)18.
 
ONGC (Oil Drilling
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nd Exploration)19.
 
Ranbaxy Labs (Pharmaceuticals)20.
 
Reliance Communications (Telecommunications - Service)21.
 
Reliance Industries Limited (Diversified)22.
 
Reliance Infrastructure (Power - Generation/Distribution)23.
 
State Bank of India (Banks - Public Sector)24.
 
Sterlite Industries (Metals - Non Ferrous)25.
 
Sun Pharma (Pharmaceuticals)26.
 
Tata Motors (
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uto - LCVs/HCVs)27.
 
Tata Power (Power - Generation/Distribution)28.
 
Tata Steel (Steel - Large)
 
29.
 
TCS (Computers - Software)30.
 
Wipro (Computers ± Software 
Technical Analysis of Indian stock marketBSE Sensex Index
The BSE SENSEX is not only scientifically designed but also based on globally acceptedconstruction and review methodology. First compiled in 1986, SENSEX is a basket of 30constituent stocks representing a sample of large, liquid and representative companies. The baseyear of SENSEX is 1978-79 and the base value is 100. The index is widely reported in bothdomestic and international markets through print as well as electronic media.Technical
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nalysis of Indian stock market BSE Sensex IndexThe Index was initially calculated based on the "Full Market Capitalization" methodology butwas shifted to the free-float methodology with effect from September 1, 2003. The "Free-floatMarket Capitalization" methodology of index construction is regarded as an industry bestpractice globally.
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ll major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones usethe Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market.
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s the oldest index in the country, it provides the time series data over afairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the yearsbecome one of the most prominent brands in the country.Technical
A
nalysis of Indian stock market BSE Sensex Index
 Q.2 What are the objectives of SENSEX?
 The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance amongindividual investors, institutional investors, foreign investors and fund managers. The objectivesof the index are: 
To measure market movements
 Given its long history and its wide acceptance, no other index matches the SENSEX in reflectingmarket movements and sentiments. SENSEX is widely used to describe the mood in the IndianStock markets. 
Benchmark for funds performance
 The inclusion of blue chip companies and the wide and balanced industry representation in theSENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds.
 
 
F
or index based derivative products
 Institutional investors, money managers and small investors all refer to the SENSEX for their specific purposes The SENSEX is in effect the proxy for the Indian stock markets. The country'sfirst derivative product i.e. Index-Futures was launched on SENSEX. 
How is SENSEX calculated?
 SENSEX is calculated using a "Market Capitalization-Weighted" methodology.
A
s per thismethodology, the level of index at any point of time reflects the total market value of 30component stocks relative to a base period. (The market capitalization of a company isdetermined by multiplying the price of its stock by the number of shares issued by the company).
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n index of a set of a combined variables (such as price and number of shares) is commonlyreferred as a 'Composite Index' by statisticians.
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single indexed number is used to represent theresults of this calculation in order to make the value easier to work with and track over time. It ismuch easier to graph a chart based on indexed values than one based on actual values. The base period of SENSEX is 1978-79. The actual total market value of the stocks in the Indexduring the base period has been set equal to an indexed value of 100. This is often indicated bythe notation 1978-79=100. The formula used to calculate the Index is fairly straightforward.However, the calculation of the adjustments to the Index (commonly called Index maintenance)is more complex. The calculation of SENSEX involves dividing the total market capitalization of 30 companies inthe Index by a number called the Index Divisor. The Divisor is the only link to the original baseperiod value of the SENSEX. It keeps the Index comparable over time and is the adjustmentpoint for all Index maintenance adjustments. During market hours, prices of the index scrips, atwhich latest trades are executed, are used by the trading system to calculate SENSEX every 15seconds and disseminated in real time. 
How is the closing Index calculated?
 The closing SENSEX is computed taking the weighted average of all the trades on SENSEXconstituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded inthe last 15 minutes, the last traded price is taken for computation of the Index closure. If aSENSEX constituent has not traded at all in a day, then its last day's closing price is taken for computation of Index closure. The use of Index Closure
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lgorithm prevents any intentionalmanipulation of the closing index value.
How is the routine maintenance of SENSEX carried out?
 One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that additional issue of capital and other corporate announcements like bonus etc. do not destroy the value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se

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