SENSEX

Sensex, also known as the S&P BSE Sensex, is a market index introduced by the Bombay Stock Exchange (BSE). It tracks the performance of the top 30 companies listed on the BSE, representing various sectors of the Indian economy. Sensex is widely regarded as a barometer of the Indian stock market, reflecting the trends of established blue-chip companies. This index is a vital indicator for investors looking to gauge the market's overall health and performance.

The BSE selects the top 30 companies based on their market capitalization and liquidity for the Sensex Index. The criteria for selection include:

- Traded Volume: The stock must have significant trading volume.

- Market Capitalization: Companies with a large market cap are prioritized.

- Listing Duration: Stocks must have a substantial history on the BSE.

- BSE Registration: Only companies registered with the BSE are considered.

- Trading Frequency: Stocks should be actively traded on most trading days.

The stock list is reviewed periodically, with changes announced in advance. Studies have shown that stock prices tend to rise when included in the index and may decrease when removed.

Sensex reflects the overall performance of the Indian stock market by tracking the changes in the prices and value of the companies it includes. Key factors include:

Individual Stock Prices

If the share prices of most companies in the Sensex increase, the overall index value goes up. Conversely, if most stock prices fall, the index value decreases.

Market Capitalization Changes

Market capitalization, which refers to the total market value of a company's outstanding shares, significantly impacts the Sensex. Large changes in the market cap of any constituent company can influence the index's value.
Economic and Political Factors

Macroeconomic indicators such as GDP growth, inflation rates, and interest rates, along with political stability and policy decisions, can affect investor sentiment and, subsequently, the Sensex.

Global Market Trends

Global economic conditions, international trade policies, and trends in major global stock indices can also influence the Sensex.

The Sensex is calculated using the free-float market capitalization method. Here’s a breakdown of the calculation process:

Market Capitalization

Market capitalization is calculated by multiplying a company's share price by its total number of outstanding shares.
Free-Float Market Capitalization

This considers only the shares available for trading in the market. It’s calculated by multiplying the market capitalization by the Free-Float Factor, which reflects the portion of shares freely tradable.

Sensex Index Value

The Sensex uses a base value of 100. To calculate the daily index value, the current total free-float market value of all Sensex companies is divided by the base market capitalization, then multiplied by the base value (100).