What is Sensex? Complete Guide
- What is the meaning of the word Sensex?
- How is Sensex made?
- How are the top companies selected?
- What are the top 30 companies
- Reasons for the ups and downs in the Sensex
- What are the advantages of Sensex
- How is the financial strength of companies calculated?
- Why do investors around the world keep their eyes on the Sensex?
Let’s talk about your practical life first. Stock market news on business or business pages when you read the newspaper. And you must have seen the name of Sensex in these news of stock market. But in reality it happens that very few people know about Sensex. Due to lack of information about Sensex, people do not understand properly what is written in that business page.
But now you will not need to turn your back on understanding the things of the Sensex and reading the business page of the Sensex because in this article we are going to give you information related to the Sensex, so read the things written in this article carefully so that you can see the Sensex. You can get complete information about In this article you will know what is Sensex? And how does the Sensex play its role in influencing the economy of the country,
why the shares of companies fall or rise due to the fluctuations of the Sensex, what is the reason for giving so much importance to the Sensex in the stock? Why do well-known and big investors keep an eye on this Sensex and how does Sensex affect private investment? To know the answer to all these questions, you have to read the complete article on what is Sensex.
What is Sensex Continuing in this article, let us now talk about how the word Sensex is formed. In common parlance we say the word Sensex but don’t think that how the word Sensex originated. So let us tell you that the word Sensex is made up of two words Sensitive and Index. After knowing this, now know about the Mumbai Stock Exchange.
The sensitive index based on the stocks of top 30 companies of Mumbai Stock Exchange is known as BSE Sensex or BSE 30 Sensex. The Nifty index is also similar to Sensex. Nifty Index i.e. the index of the National Stock Exchange is known as Nifty. The volatility in the shares of 50 companies is revealed through the Nifty index. What is Sensex?. What is Sensex?.
What is the meaning of the word Sensex?
Let us proceed by reading about what is Sensex. If a common man wants to know the latest developments in the stock market of Mumbai, then he has to first pay attention to the ups and downs of the Sensex. Markets start opening from morning itself. At the same time, with the opening of the market, fluctuations in the Sensex are also seen. The volatility of this Sensex also gives information about the financial position of the companies involved. Due to this fluctuation,
the list of 30 companies included in the Sensex is not always the same. The thing to know is that the Mumbai Stock Exchange keeps on changing the list of its shares according to the need. Whatever may be the reversal, but the number of shares in the Sensex remains only 30. This is the specialty of Sensex.
We call it Sensex in common parlance but Sensex is actually known as S&P BSE Sensex i.e. Sensitive Index of S&P Bombay Stock Exchange. And you should also know that Sensex is a free float market weighted stock market index of 30 large and established listed companies in the Mumbai stock market.
Now if we know a little more about BSE i.e. Bombay Stock Exchange, 30 such companies are selected in BSE from amongst the most traded and most active mass traded stocks which play their role in representing the Indian economy. , In addition, these companies are also responsible for representing different industrial sectors. The index of thirty stocks obtained in this way is known as Sensex.
If you want to know the base year of Sensex, then the base year of Sensex is considered as 1978-79. From 1978-79 onwards, this Sensex tried to make its deepest roots in the Indian economy. And by 1 January 1986 it was successful in consolidating its position. With this success, the BSE Sensex came to be regarded as the largest among the domestic stock markets of India.
At the same time, it also got fame as the lifeblood of the Indian economy. And since then it is continuously on the path of its progress. But at times it has to face severe setbacks due to various adverse economic conditions in between. What is Sensex?. What is Sensex?.
How is Sensex made?
Let us proceed by reading about what is Sensex. How is Sensex formed? Let’s try to know this too. Well you must be aware that Sensex is a major part of Bombay Stock Exchange i.e. BSE. The index consisting of the stocks of 30 major companies of India is known as Sensex. If seen properly, there are more than 6000 companies listed in Bombay Stock Exchange.
But when it comes to the calculation of Sensex, only 30 companies are selected from the listed companies. The reasons for the inclusion of these 30 companies in the Sensex are as follows- First, the shares of all these 30 companies are the most bought and sold.
And the second reason is that these 30 companies are those companies whose market value is half of all the shares listed on BSE. This in itself is a great achievement.
And the last reason is that these 30 majors have the potential to represent 13 different sectors. Also, another reason for choosing these 30 companies is that all these companies are considered to be the largest companies in their respective sectors. And all these companies have the potential to play a decisive role in the Indian economy.
The Index Committee of the stock exchange takes the responsibility of selecting these 30 companies. Government and non-government representatives play their roles in the index committee of the stock exchange. Along with this, eminent economists, bank officials and government officials are also included in this index committee. Then the index committee of the stock exchange is able to make the Sensex. What is Sensex?. What is Sensex?.
How are the top companies selected?
Let us proceed by reading about what is Sensex?. Now let’s talk about how the top 30 companies are selected for the Sensex. Well, you have already been informed about this. That the Sensex Index Committee is responsible for the selection of companies with those 30 major stocks.
Then they are included in the Sensex. But let’s try to get an idea of the criteria that are followed by the index committee while selecting these top 30 companies.
First- First of all, the index committee considers the name of the company whose shares have been listed on the stock exchange for the last one year or more.
Second- Index committee selects that company for Sensex, The number of days whose shares are open in the last one year,, it is mandatory to buy or sell the shares of that company on all those days. This means that it is necessary to buy shares of that company every day throughout the year.
Third- The third criterion is that these companies must be among the largest 150 companies in the country in terms of average number of trades per day and also in value.
These parameters are adopted by the Sensex committee. What is Sensex?. What is Sensex?.
What are the top 30 companies
Let us proceed by reading about what is Sensex?. Taking detailed information about the Sensex, now we also know that which are the top 30 companies included in the Sensex? Also know on the basis of what capabilities these companies are included in the Sensex? And by what name do people know those companies? So let us tell you that the selected 30 companies are very strong in themselves as well as play an important role in influencing the Indian economy.
If you give correct information about these companies, for the first time in 1986, 30 companies were included in the Sensex. If these 30 companies are measured in terms of financial capability, then these companies also remain at the top in this sector and they get the top status even when viewed from the point of view of market cap.
Along with this, it is common for the shares of these companies to remain in the stock market all the time. And there is also one thing that the shares of these companies always create a ruckus in the market. 30 such companies are known in the language of the market as Blue Chip Companies. What is Sensex?. What is Sensex?.
Reasons for the ups and downs in the Sensex
Let us proceed by reading about what is Sensex?. Let us now know why the Sensex fluctuates. By the way, you will be aware that the Sensex is always ready to give moment to moment information about the ups and downs of shares in the stock exchange. This Sensex keeps a close watch on the price movements of 30 listed companies. The simple thing to understand here is that if the price of shares starts rising in the market of companies listed in the Sensex,
then it directly affects the Sensex and there is a tremendous jump in the Sensex too. But on the contrary, if the prices of the shares of these companies fall, then the Sensex also falls.So you must have understood that the financial performance of these companies is responsible for the fluctuations in their share prices. Let us try to understand this thing again,
suppose a new and big project has been launched by a company and its business is expected to grow. So we can definitely say that the share price of that company will see more jump than expected. But if something to the contrary happens, such as a company suddenly comes into financial trouble or any kind of legal action is taken against that company or that company is suffering financial loss in any way.
So in such a situation, there is a fall in the shares of that company. And once there is a decline, it becomes natural for the company’s shares to go down very low. And the shares of such a company also start selling in the market. And in this way no one is ready to make a loss deal by keeping the shares of that company. And this has a direct effect on the Sensex. And the Sensex starts coming down. What is Sensex?. What is Sensex?.
What are the advantages of Sensex
Let us proceed by reading about what is Sensex?. Now let’s try to know what are the benefits of Sensex. So let us tell you that the performance of the ups and downs in the Sensex has many benefits for the companies. Apart from this, investors investing in stocks are also able to take a lot of benefits from this Sensex.
Through Sensex, investors are able to predict the changes in the stock exchange and are able to use their capital in the right way. Not only this, there are many benefits from the Sensex, those benefits should also be known.-
- Sensex proves to be very beneficial for investors. Because investors keep an eye on this Sensex and are able to make predictions. And by guessing they are able to take profitable trades. And investors leave behind loss deals.
- Let me tell you here that some people believe that there can be no direct advantage of the Sensex. But for those people who want to know the movement of rupee, indirectly Sensex proves to be beneficial.
- It is important for you to know that the movement of the rupee has an effect on the stocks. In the same way, it also affects the financial condition of the major markets of the country. And with the help of this, the economic condition of the markets is also known. You can understand it in this way that when the rupee is strong then we start getting things cheap in the market but on the contrary when the rupee is weak then we start getting things expensive in the country.
- As you know, investors keep a close eye on the Sensex. And as the Sensex goes up, the investors move further to invest their money in those companies. The company whose shares see a jump. And in this way, when more money comes from investors, then those companies start on the path of progress. Of course, those companies tend to go up.
- And thus these companies also start expanding. It is obvious that when a company expands, that company needs more new people than before. To meet this shortage, that company starts giving jobs to new people. Due to this unemployed people start getting employment. Due to which unemployment starts decreasing in the country. In this way, the economy of the country also starts getting stronger from it.
- We often see that when the stock market starts booming then the Sensex also starts going up. With this, local investors come to the country, apart from this, investors from all over the world also start coming. Thus foreign investors also start showing their interest in investing in Indian companies. This has a direct effect on the rupee and it becomes natural for the rupee to rise. And the Indian rupee gains strength against the foreign currency.
- After this, when the rupee strengthens, then it does not take long for the Indian markets to benefit. With the strengthening of rupee, goods imported from abroad start getting at lower prices than before.
- But if the opposite happens. For example, if there is a fall in the shares and the Sensex starts falling due to the fall in the shares. So as a result the rupee will also fall. After this, when the rupee depreciates, things will also start getting expensive. Apart from this, for the goods imported from abroad, we will have to pay more than before. That is because in such a situation the rupee will become cheaper than the foreign currency.
If seen properly, the financial condition of the Indian stock market after the recent global Great Depression is worth seeing. If seen today, the Indian stock market is continuously spreading its feet towards the heights. If we talk about long time ago. When the Sensex was launched in 1990, it used to remain only up to four digits. But if the Sensex figures are seen in today’s time,
then it has reached five digits which is enough to understand that the Sensex is constantly touching the heights. This Sensex has crossed 30,000 at present and is not lagging behind in making a new record day by day. The continuous rise of the Sensex can be considered a very auspicious sign for the Indian economy. What is Sensex?. What is Sensex?.
How is the financial strength of companies calculated?
Now let’s talk about how the financial strength of companies is measured. So you know also this too. The financial strength of the companies is known as the market cap. This market cap being the market capitalization of a company is also known as the strength of the company. If anyone wants to know the financial strength of the company.
He can know the financial strength of the company by multiplying the total number of shares issued by the company by the market price per share. To understand this better, you can assume that if a company has issued one lakh shares of ten rupees each, then the market cap of the company will be ten lakh rupees.
Understand this more, now if this company kept the price of one share at Rs 50, then its price would be up to Rs 50 lakh. Another thing is that now if the promoters’ stake in this company is 40 percent and the public’s stake is 60 percent, then the free float factor in this company will be 0.6.
Now you must have understood that according to the calculation of the index in this way, the share of the market cap of this company has become 60 percent. This is how the free float market capitalization of the entire index is calculated. And thus the financial strength of the companies is judged. What is Sensex?. What is Sensex?.
Why do investors around the world keep their eyes on the Sensex?
As you know, the way Indian Sensex is achieving success in making new records of heights. Because of this, investors from all over the world keep their eyes on the Indian Sensex. Because those investors are expecting good income from the Indian Sensex. Along with this, foreign investors maintain good future expectations with the Indian Sensex.
For this reason, investors from all over the world do not forget to take special interest in India’s Sensex and Nifty. Also, these investors do not lag behind in making good investments in Indian companies. What is Sensex?. What is Sensex?. What is Sensex?. What is Sensex?. What is Sensex?. What is Sensex?. Let us proceed by reading about what is Sensex?.