Know The Sensex

A Presentation By-

Romendra Singh Negi

 WHAT IS SENSEX?
The Sensex is an indicator of all the major
companies of the BSE.
 If Sensex goes up- prices of the stocks of most
of the major companies on the BSE have gone
up.
 If Sensex goes down- stock price of most of
the major stocks on the BSE have gone down.
 HOW TO CALCULATE SENSEX?

 By taking into consideration stock prices of 30

different BSE listed companies.
 By using the “free-float market capitalization”
method.
 A world wide accepted method as one of the best
methods for calculating a stock market index.
 “MARKET CAPITALIZATION”

Worth of a company in terms of it’s shares.

 if you were to buy all the shares of a particular company, what
is the amount you would have to pay? That amount is called
the market capitalization.
 market cap of a company
= “current share price”× “number of shares issued by the
company”.
 “FREE-FLOAT MARKET
CAPITALIZATION”

Value of the shares of the company in the open market.

 A company has to submit a complete report about “who has how
many of the company’s shares” to the BSE.
 On the basis of this, the BSE decides the “free-float factor” of the
company.

Free-float market cap = Free-float factor × Market cap

HOW DO YOU FIND OUT THE VALUE OF
THE SENSEX AT A PARTICULAR POINT
1- Find out the “free-float market cap” of all the 30 companies that
make up the Sensex.
2- Add all the “free-float market cap’s” of all the 30 companies.
3- Make all this relative to the Sensex base. The value you get is the
Sensex value.
Example- Suppose, for a “free-float market cap” of Rs.100,000 Cr.
the Sensex value is 4000.
Then, for a “free-float market cap” of Rs.150,000 Cr... the
Sensex value will be..

=6000
 WHICH 30 COMPANIES
 The 30 companies that make up the Sensex are selected and
reviewed from time to time by an “index committee”.
 This “index committee” is made up of academicians, mutual fund
managers, finance journalists, independent governing board
members and other participants in the financial markets.
The main criteria for selecting the 30 Companies:
Market capitalization: The company should have a market
capitalization in the Top 100 market capitalization’s of the BSE.
Also the market capitalization of each company should be more
than 0.5% of the total market capitalization of the Index.
Trading frequency: The company to be included should have been
traded on each and every trading day for the last one year.
cONT…
Number of trades: The scrip should be among the top 150
companies listed by average number of trades per day for the
last one year.
Industry representation: The companies should be leaders in
their industry group.
Listed history: The companies should have a listing history of at
least one year on BSE.
Track record: In the opinion of the index committee, the
company should have an acceptable track record.