What Does Sensex Mean in Stock Market?
If I were to ask you to give me a real-time summary of the restaurants that serve the best Indian food, how would you do it?
The wise thing would be to get handy some of the articles that extensively talk about the best Indian cuisine restaurants or ask your dear and near ones. Drawing parallels, if I were to ask you how the stock market is moving today, it would be very difficult for you to give an answer since you have to do proper research about the listed companies. So what do we do?
This is where Sensex enters the picture. It is the most widely tracked indices in the world. Watched by domestic and international investors, as well as policymakers and the media. Its movements are often seen as a reflection of the broader economic and political trends in India.
Let’s dive deep into the blog to learn more about what is BSE Sensex meaning, Sensex price, Sensex highest in history, calculation & formula and much more.
What is Sensex?
Sensex stands for Stock Exchange Sensitive Index. Sensex meaning is a stock market index that comprises the 30 largest and most actively traded stocks on the Bombay Stock Exchange (BSE). It is often considered to be the benchmark index for the Indian equity market.
The Sensex history dates back to 1986. It is the oldest stock index fund in India and is operated by Standard & Poor’s (S&P). Over the years, it has become an important barometer of the Indian stock market. It reflects the performance of some of the country’s most successful and influential companies. It has undergone several changes since its inception. This includes revisions to its constituent companies and the methodology used to calculate it.
Therefore, it can be a crucial indicator of the health of the Indian economy and the overall performance of its stock market. It is one of the most widely tracked indices in the world. It is closely watched by domestic and international investors, as well as policymakers and the media. Many people often see its movements as a reflection of the broader economic and political trends in India.
List of Companies in Sensex
Let’s have a look at the companies that are included in Sensex.
| Company Name | Industry | Market Cap | Number of Shares | EPS |
|---|---|---|---|---|
| Asian Paints Ltd | Paints | ₹31,84,153 | 959.2 | 56.4 |
| Axis Bank Ltd | Banking | ₹34,98,414 | 3,084.2 | 42.7 |
| Bajaj Finance Ltd | Finance | ₹47,88,134 | 618.0 | 212.2 |
| Bajaj Finserv Ltd | Finance | ₹27,13,208 | 1,595.5 | 88.3 |
| Bharti Airtel Ltd | Telecom | ₹63,34,027 | 6,017.2 | 15 |
| HCL Technologies Ltd | Software | ₹39,27,895 | 2,713.7 | 57.8 |
| HDFC Bank Ltd | Banking | ₹1,27,12,856 | 7,592.5 | 72.6 |
| HUL | FMCG | ₹60,60,536 | 2,349.6 | 43.8 |
| ICICI Bank Ltd | Banking | ₹69,65,872 | 7,015.0 | 58.0 |
| Indusind Bank Ltd | Banking | ₹12,73,770 | 777.7 | 111.5 |
| Infosys Ltd | Software | ₹63,41,676 | 4,150.5 | 58.8 |
| ITC Ltd | Food & Tobacco | ₹12,475.6 | 12,479.1 | 16.4 |
| JSW Steel Ltd | Steel | ₹20,18,355 | 2,445.5 | 39.0 |
| Kotak Mahindra Bank Ltd | Banking | ₹36,42,174 | 1,987.7 | 85.6 |
| Larsen & Toubro Ltd | Engineering | ₹48,22,740 | 1,374.5 | 105.4 |
| Mahindra and Mahindra Ltd | Automobiles | ₹19,99,594 | 1,243.5 | 88.9 |
| Maruti Suzuki India Ltd | Automobiles | ₹31,28,306 | 314.4 | 354.6 |
| Nestle India Ltd | Food & Tobacco | ₹2,53,453 | 96.4 | 30.8 |
| NTPC Ltd | Power | ₹30,68,995 | 9,696.7 | 19.8 |
| Power Grid Corporation of India Ltd | Power | ₹22,54,466 | 9,300.6 | 16.9 |
| Reliance Industries Ltd | Energy | ₹1,75,00,541 | 6,766.1 | 113.9 |
| State Bank of India | Banking | ₹56,05,995 | 8,924.6 | 77.5 |
| Sun Pharmaceutical Industries Ltd | Pharmaceuticals | ₹31,32,572 | 2,399.3 | 35.9 |
| Tata Motors Ltd | Automobiles | ₹27,38,026 | 3,322.8 | 45.8 |
| Tata Steel Ltd | Steel | ₹16,61,28 | 12,383.8 | -5.6 |
| Tata Consultancy Services Ltd | Software | ₹1,42,84,209 | 3,618.1 | 123.9 |
| Tech Mahindra Ltd | Software | ₹13,56,889 | 976.2 | 37.2 |
| Titan Company Ltd | Retailing | ₹33,83,353 | 887.8 | 37.4 |
| UltraTech Cement Ltd | Cement | ₹29,14,880 | 288.7 | 197.1 |
| Wipro Ltd | Software | ₹25,35,141 | 5,224.4 | 21.7 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the top sensex companies in India in the list is from 19th January 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
How Sensex is Calculated?
Sensex, also known as the S&P BSE Sensex, is an index of the Bombay Stock Exchange (BSE), which is a benchmark index of the Indian equity market. It represents the performance of the top 30 companies listed on the BSE, based on market capitalization. Now that we have understood what is Sensex, here’s how the Sensex is calculated:
Methodology of Calculation
The calculation of the Sensex involves taking into account the free-float market capitalization of the 30 companies that are part of the index. The free-float methodology takes into account only the shares that are available for trading in the market. Thus, it excludes the shares held by promoters, governments, and strategic investors.
It is calculated using a market capitalization-weighted methodology. This means that the weightage of each share in the index is proportional to its free-float market capitalization.
Factors Affecting the Calculation
Several factors affect the calculation of the Sensex. Including the market capitalization of the 30 companies that constitute the index and changes in the prices of the stocks. Additionally, alterations in the number of outstanding shares due to bonus issues, stock splits, and mergers and acquisitions.
The Index Committee of the BSE periodically reviews its composition and makes changes based on various criteria. Such as market capitalization, liquidity, trading frequency, and sector representation.
Sensex Formula
The formula for calculating the Sensex is as follows:
| Sensex = (Total free-float market capitalization of 30 companies / Index Divisor) x Base Value |
where:
- Free-Float Market Capitalization: The sum of the free-float market capitalization of the 30 companies that are part of the index.
- Index Divisor: A number that is used to adjust the index for changes in the number of shares outstanding. Dependent factors are bonus issues, stock splits, and mergers and acquisitions.
- Base Value: The value of Sensex on the base date of January 1, 1979, which was set at 100.
How Do Sensex Constituents Get Decided?
Each stock undergoes thorough due diligence before being included in the Sensex. Thus, this ensures that only high-quality stocks become part of this index. Companies must meet the following five criteria to be considered for addition to the Sensex:
- Listing on Bombay Stock Exchange (BSE): To qualify for the Sensex, a company must be listed on the BSE. If it is not listed on the BSE, it cannot be included in the Sensex.
- Large or Mid-sized Market Capitalization: Eligibility for addition to the Sensex requires a company to have a large-to-mid-size market capitalization. This criteria ensures that only the best and biggest companies are part of this index.
- High Liquidity of Shares: For a stock to be considered for addition to Sensex, it needs to be liquid. This means that the particular stock should be easily tradable, both in terms of buying and selling.
- Substantial Revenue from Core Activities: Companies seeking inclusion in the Sensex must generate a significant portion of their revenue from core business activities. For instance, companies like Bharti Airtel or Sun Pharma may derive substantial revenue from their respective core businesses.
- Sector Weight of the Company: Maintaining sector balance is another crucial criteria. In any given index, each sector is assigned a specific weight, serving as a representation of its impact on the overall economy.
Milestones of Sensex
Let’s have a look at the significant milestones of the BSE Sensex list.
- The Sensex was first introduced on January 1, 1986. It started with a base value of 100 and served as a barometer of the Indian stock market’s overall performance.
- Crossed around the 5000 mark in October 1999, and the 20,000 mark in 2007.
- The Sensex tumbled during the global financial crisis of 2008, reaching a low of around 8,000 points in October 2008.
- After hitting a low in 2008, the it has recovered, reaching the 20,000-point mark in 2010.
- Crossed the 30,000 mark in 2015, buoyed by positive economic sentiments and reforms.
What is Nifty and Sensex? – Differences
Sensex and Nifty are both benchmark indices of the Indian stock market. The Sensex, also known as the S&P BSE Sensex, is an index of the Bombay Stock Exchange (BSE). However, the Nifty, also known as the Nifty 50, is an index of the National Stock Exchange (NSE). Both indices are used to represent the performance of the Indian equity market. Thus, they are closely watched by investors, traders, and analysts.
Let’s review the difference between Sensex and Nifty below:
| Basis of Comparision | Sensex | Nifty |
|---|---|---|
| Definition | Represents the performance of the top 30 companies listed on the BSE, based on market capitalization. | Nifty, also known as the Nifty 50, is an index that represents the performance of the top 50 companies listed on the NSE, based on market capitalization. |
| Exchange | Bombay Stock Exchange (BSE) | National Stock Exchange (NSE) |
| Number of Companies | 30 | 50 |
| Calculation Method | Market capitalization-weighted methodology | Free-float market capitalization-weighted methodology |
| Base Date | January 1, 1979 | November 3, 1995 |
| Base Value | 100 | 1,000 |
| Weightage | Proportional to free-float market capitalization | Proportional to free-float market capitalization |
| Sectors | Covers a broad range of sectors | Covers a broad range of sectors |
| Review | Reviewed periodically by the Sensex Index Committee of the BSE | Reviewed periodically by the Index Committee of the NSE |
How to Invest in Sensex?
Investing in the Sensex, the benchmark index of the Bombay Stock Exchange offers exposure to the top 30 blue-chip companies in India. Here are some common ways to do it:
Direct Stock Investment
- Open a brokerage account.
- Buy shares of the 30 companies that make up the Sensex.
- Requires research and active management.
Exchange-Traded Funds (ETFs)
- Invest in Sensex-tracking ETFs that mirror the index performance.
- Easier and more affordable than buying individual stocks.
- Lower risk due to diversification.
Mutual Funds
- Invest in Sensex-based mutual funds managed by professionals.
- Offers various options and risk levels.
- Convenient and hands-off approach.
How to Invest in Sensex via smallcase?
smallcase is a platform that allows investors to invest in a diversified portfolio of stocks and Exchange Traded Funds (ETFs) based on various themes or strategies. Here are the steps to invest in a Sensex-based smallcase:
- Open a demat account online with a broker that supports smallcase. Some popular brokers that support smallcase are Zerodha, HDFC Securities, and ICICI Direct.
- Log in to your smallcase account using your broker credentials.
- Browse and select the Sensex-based smallcase that you want to invest in. You can filter the smallcases based on the theme, returns, and other parameters.
- Once you have selected the smallcase, you can see its details. This includes the stocks and ETFs it comprises, its performance history, and its allocation.
- You can invest in the smallcase by choosing the amount you want to invest and placing an order. smallcase will allocate the amount to the constituent stocks and ETFs based on their weightage.
- Once you have invested, you can monitor your investment and track its performance using the smallcase dashboard.
(Note: It’s important to do your own research and analysis before investing in a smallcase or any other investment product. Also, past performance is not indicative of future results.)
What are the Components of Sensex?
The Sensex is composed of the following components:
- Number of Companies: Consists of 30 companies listed on the Bombay Stock Exchange (BSE).
- Industry Sectors Represented: Represents a broad range of sectors, including banking and finance, energy, IT, pharmaceuticals, and consumer goods.
- Examples of Companies Listed: Companies listed in the Sensex are Reliance Industries, HDFC Bank, Infosys, Tata Consultancy Services, ICICI Bank, Larsen & Toubro, Hindustan Unilever, Kotak Mahindra Bank, and State Bank of India.
What are the Factors Affecting Sensex?
We have grouped a range of factors into three different categories that influence it. Let’s have a look.
Macroeconomic Factors
- Interest Rates: Changes in interest rates can affect the borrowing costs of companies, which can impact their earnings and the overall market sentiment. Resulting in changes in the Sensex points and price.
- Inflation: High inflation can lead to an increase in input costs, which can impact the profitability of companies. In turn, affects the Sensex points and price.
- Foreign Exchange Rates: Changes in exchange rates can impact the exports and imports of companies. Thus, this can have an impact on their earnings and the Sensex price and points.
Industry-Specific Factors
- Technological Advancements: Technological advancements can impact the competitiveness and growth prospects of companies. Especially in sectors such as IT and telecom, which can affect the Sensex points and price.
- Regulatory Changes: Changes in regulations, such as taxation and environmental norms, can impact the operations and profitability of companies. Thus, this can affect the Sensex points and price.
- Mergers and Acquisitions: Mergers and acquisitions can impact the competitive landscape of industries and the financial performance of companies, leading to changes in the Sensex points and price.
Company-Specific Factors
- Financial Performance: The financial performance of individual companies, such as revenue, earnings, and profit margins, can impact their stock prices, which can influence the Sensex price and points.
- Management Changes: Changes in management, such as the appointment of a new CEO, can impact the strategic direction and performance of companies, which can affect their stock prices and the Sensex price and points.
- Market Share and Competition: Changes in market share and competitive dynamics within industries can impact the earnings and growth prospects of companies. This may affect stock prices and the Sensex points and price.
Which of the Following is Responsible for Fluctuations in the Sensex?
Over the years, the Sensex has witnessed significant fluctuations, impacting the Indian stock market. The primary factors contributing to these performance swings include the announcement of investor-friendly policies by companies and governments, natural or manmade disasters, and various other influencing factors.
The global economic changes have also played a role in shaping the Sensex’s performance. In 2008 and 2009, the intraday trading fall in the Dow Jones Industrial Average triggered a stock market crash, causing a profound crisis in the world economy. This downturn had repercussions on the Indian stock market as well. On January 21, 2008, the Indian stock market experienced a loss of 1408 points, leading to a subsequent downward spiral, resulting in a one-day trading halt.
What are the Benefits of Sensex?
The Sensex, as a benchmark index of the Indian stock market, has several benefits, including:
- Measure of the Health of the Indian Economy: It often serves as a barometer of the Indian economy’s health. Comprising the stocks of the top 30 companies across various industries, any significant movements in the Sensex price and points can indicate the performance of the broader economy.
- Tool for investment Decision-Making: It can also serve as a tool for making investment decisions. You can use the Sensex as a reference point to evaluate the performance of the portfolio and compare it to the broader market. Additionally, you can use it to identify trends and opportunities in various sectors and make informed investment decisions.
- Source of Information on the Performance of Companies and Industries: It provides information on the performance of the constituent companies and industries. You can analyze the performance of individual companies and industries by identifying their strengths, weaknesses, and growth prospects.
What are the Risks Associated with Sensex?
Investing in Sensex stocks or any stock market carries certain risks, including:
- Volatility of the Stock Market: Market volatility affects it, causing significant price and point fluctuations in response to news, events, and market sentiment. This can lead to sudden and unexpected losses for investors.
- Market Manipulation: The stock market can also be subject to manipulation by certain market players, such as insider trading or rumors, which can distort stock prices and affect the Sensex points and price.
- External Factors: External factors like political instability, government policy changes, natural disasters, or global economic events (e.g., recessions, currency fluctuations) can also influence it. These factors can impact the stock market and the Sensex price and points.
To Wrap It Up…
In conclusion, the Sensex is an important tool for investors and serves as a barometer of the Indian economy. However, investing in the Sensex or any stock market involves certain risks, such as market volatility, market manipulation, and external factors affecting the stock market. But with a trustable platform like smallcase you can easily mitigate these challenges via portfolio management and investing.
smallcase provides a convenient and cost-effective way for investors to gain exposure to some of India’s top-performing companies. By diversifying across multiple sectors and companies, you can mitigate some of the risks associated with investing in individual stocks.
However, as with any investment, it’s important to carefully evaluate your risk tolerance, investment objectives, and to conduct your own research and analysis before making any investment decisions. With the right approach and a long-term perspective, investing in the Sensex through smallcase can be a smart and rewarding investment strategy.
FAQs
The term Sensex refers to the benchmark index of the BSE in India. It comprises 30 of the largest and most actively traded stocks on the BSE.
The full form of SENSEX is the Stock Exchange Sensitive Index.
Each point reflects the combined value of the 30 biggest companies listed. Higher points usually mean a growing market, while lower points signal a dip. So, it’s a quick snapshot of investor confidence and economic health.
Stands for ‘Stock Exchange Sensitive Index’, is the stock market index for the Bombay Stock Exchange. Nifty stands for ‘National Stock Exchange Fifty’ and is the index for the National Stock Exchange.
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