What-Is-Sensex-and-Its-Importance-in-the-Indian-Stock-Market

1765 Words Sep 6th, 2011 8 Pages
December 17, 2009

Sensex is basically an indicator of the health of the stock markets in India. It is the most popular stock market index in India. It is just a number and the value of Sensex is closely followed by a number of investors, promoters, market experts, brokers and several other stakeholders not only in India but across the world. One can know the relative strength or weakness of the Indian stock market by the movement of Sensex on the Bombay Stock Exchange, popularly known as BSE. Sensex is an acronym for ‘Sensitive Index’ of the BSE, the country’s wellknown stock exchange with its existence dating back to 1875. With a history of 134 years, it is Asia’s oldest stock exchange. It started as “The Native Share and Stock Brokers’
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Rama Krishna Vadlamudi, BOMBAY

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December 17, 2009 Page 2 of 5

Sensex is expressed in number of points indicating the relative price movements of India’s 30 topmost companies as compared to previous day, year, decade or even a minute. The Sensex changes its value every nano second, in a constant manner, during the market trading hours. The companies that form part of BSESensex are picked up by the management of BSE – based on factors, like, track record of the company, number and frequency of shares traded on the exchange, financial performance and strength of the particular company, market capitalization and industry/sector-wise representation. Every company will be given a particular weight in the Sensex depending on its market capitalization and free float. Market capitalization is number of paid-up equity shares of a company multiplied by its current market price and it is total market value of the company’s equity shares. Free float is defined as the number of listed equity shares of a particular company that are readily available for trading on the stock exchange. Free float is nothing but number of shares held by investors other than the stake owned and controlled by promoters and their strategic partners with controlling interest, Government shareholding (if any), equity shares held by associate or group companies and equity shares held by Employees’ Welfare Trusts. For

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