What is Sensex and how is it formed?

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What is Sensex? Do you know about it? Often you must have read or seen about Sensex in newspapers and TV. A separate page will be seen in the newspaper about Sensex. In which it will be seen that the Sensex has gone to so many points today or there is a recession in the market today. Sometimes when Sensex makes its new high of digits, it must have been written in the newspaper that today the stock market has made investors rich.

Whenever you have thought of investing your money, then the option of Sensex must have come to your mind. But you may not understand these words. I didn’t understand anything about it in the beginning because I didn’t know about Sensex at that time. So since I started reading about investing, I also learned about Sensex. Which I will tell you in detail in this article today

We have already told you about nifty. If you have not known about Nifty, then definitely read our article on what is Nifty. In this I have explained in detail about Nifty. Also explained the difference between Nifty and Sensex. Well if you know about Nifty then definitely read this detail post based on Sensex till the end.

What is Sensex?

Sensex is the market index of BSE. The structure of which is the stock market analyst Mr. By Deepak Mohoni. Sensex is made up of two words sensitive and index. Before January 1, 1986, the Bombay Stock Exchange did not have any official index of its own. It was during this time that the Sensex was established. The purpose of which is to show the performance of the shares of top 30 companies in the shares of about 5000 companies listed in bse.
With the help of these 30 stocks, traders and investors can easily find out the rise and fall in the market price. The top 30 companies listed in the Sensex come from different sectors of the Indian economy. If there is an increase in the price of the Sensex, then it is assumed that the share price of most of the companies listed in the Sensex has increased. On the other hand, if there is a slowdown in the price of the Sensex, then it is understood that the share price of all the companies has declined.

Bombay Stock Exchange was established in the year 1975. It is the oldest and first stock exchange in India.
Sensex shows the performance of 30 major companies of India. All these companies are very big according to the market capitalization. Due to the large market capitalization, today all these companies are equal to 37 percent of the total GDP of India. On February 19, 2013, both the BSE and S&P Dow Jones indices had an alliance to calculate the Sensex. Like BSC, Sensex is also one of the oldest index.

How are companies listed in Sensex?

To get listed in the Sensex, a company has to fulfill five criteria set by the S&P BSE Index Committee.

1. For any company to be listed in the Sensex, it is necessary to first register in BSC.
2. Companies must have a large market capitalization.
3. The company is earning income from its core activities.
4. There should be liquidity in the shares of the company.
5. Any company should play an important role in keeping its sector balanced with the equity market of the country.

How is Sensex calculated?

1. Sensex provides information on 30 stocks out of about 5000 Equity Shares listed on BSE.
2. The market capitalization of all the top 30 companies is determined.

3. The free float market cap of all companies is determined.

Free float market capitalization means all the shares of the company which are floating in the market, the only difference is that the shares of the promoters are not added to it.

For example a company has issued 300000 shares in the market but in this 1.6 lakh shares are with the promoters then the free float market cap is 1.4 lakh shares.

4. Sensex is calculated on the basis of the formula given below.

Sensex = [ Total Free Float Market Capitalization / Base Market Capitalization] * Base Index Value

5. To calculate the Sensex, 1978-79 is considered as the base year. It is a constant value.

6. Base Index Value is considered to be 100.

7. For example, suppose the market cap of top 30 companies is 8070000. At the same time, suppose the base index is 60000 and the base index value is 100 then
Sensex = [ Total Free Float Market Capitalization / Base Market Capitalization] * Base Index Value

Sensex – ( 8070000/60000)*100
= 13450

Benefits of Sensex

By the way, the biggest benefit of Sensex is to the trader and investor. He can easily keep an eye on the movements in the market through the Sensex. You can invest your money in the right place. But there are some other benefits of Sensex which are mentioned below-

1. Due to the rise in Sensex, investment in companies increases, due to which the market value of the company also increases.
2. The higher the demand for the shares of a company, the more the value of the shares will increase. This gives the company financial support to expand itself.
3. Companies in the top 30 have an increase in Goodwill.
4. Foreign investors keep an eye on the Sensex, if the Sensex is up, then they also invest. Due to which foreign exchange comes to our country. This is good for both the economy and the company of the country. Also, foreign investment will strengthen the country’s currency. The stronger the rupee, the cheaper things will be.

Friends, by the way, there is nothing direct in the benefits of the Sensex, but it has many benefits indirectly. Out of those benefits, I have told you some points in detail above. I hope you have enjoyed reading this article so far, let me now give information about the companies listed in the Sensex.

Which company is in Sensex?

Following are the names of top 30 companies in Sensex-


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