
The index was originally published in 1986 with
a base value of 100 and with the base year as 1978-1979. The base value was set
at 100 to make calculations easy, and so that percentage change could be
represented logically. For example, if the market capitalization of the stocks
on the index rose by 10%, the index would accordingly rise 15% to 110.
It is considered the benchmark index of the
Indian stock market. It is the oldest index in India and provides time-series
data from 1979, BSE, previously known as Bombay Stock Exchange, says on its
website.
The objective of the S&P BSE SENSEX Today
is to measure the performance of the top 30 stocks in India by market cap and
liquidity. The index has seen a few changes in its methodology as the Indian
market has evolved over the past three decades, but none have affected the
objective of the index. The most recent change was the consideration of differential
voting right (DVR) shares as securities eligible for inclusion in the index,
subject to fulfilling the size and liquidity criteria of the index methodology.
.
A Brief History of the Sensex
The S&P BSE Sensex Today, or just the
Sensex as it is known, is an index of actively traded stocks of 30 financially
stable and well-performing organizations representing various industrial
sectors. The market capitalization and liquidity of these stocks make them
eligible for this list.
The list includes industry heavyweights from
different sectors like TCS, SBI, HDFC Bank, Reliance Industries, Infosys, ONGC,
ITC, Sun Pharmaceuticals, SBI, Tata Motors, and Maruti Suzuki, among others.
The index assigns weight to each of these 30 stocks, and, depending on the
movement in these stocks, the index goes either up or down. However, over 5,000
stocks are actively traded on the index.
The index is calculated using the free float of
the 30 stocks multiplied by their market cap. This number is then divided by
the present level of the index to find the value of the Sensex.
The index is managed by a committee comprising
fund managers, academicians, finance journalists, and market participants.
Given its long historical data and wide acceptance, the index is often called
the pulse of the Indian stock markets.
How is the Sensex Calculated?
Sensex Today, which is also referred to as BSE
30, was calculated based on the market capitalization or “Full Market Capitalization”
when it was launched but shifted to a "Free-float Market Capitalization"
methodology from September 1, 2003. This method is used by all major index
providers including MSCI and FTSE.
Free float is the proportion of total
shares issued by the company that is readily available for trading to the
general public. It does not take into account promoters’ holding, government
holding, and other shares that will not be available in the market for trading
in the ordinary course of events.
Free-Float Market Capitalization = Market
Capitalization x Free Float Factor
To give an example, let’s assume that
Firm A has 100 shares. Out of these 100, 70 are available to the general public
and 30 are owned by the government. This means that 70 are ‘free-floating` shares
and thus the free float factor will be 70%.
‘Market capitalization’ is the valuation
of the company. It can be determined by multiplying the price of a share with
the number of shares issued.
To Calculate Sensex Today:
1.
The market capitalizations
of all 30 companies in the index are determined.
2.
The Free
Float market capitalization of all 30 companies is calculated.
3.
Free Float
market capitalizations of all the firms are added to get a total.
4.
Formula of
Sensex is applied; Sensex = (total free float market capitalization/ base
market capitalization) * Base index value.
5.
The base
year to calculate Sensex is 1978-79 and the base value is static but it has to
be changed. According to BSE, Rs. 2501.24 crore is to be used as the base
market capitalization.
6.
The base
index value is 100.
7.
So, Sensex
= free-float market capitalization of 30 firms /25041.24 crores*100
BSE Sensex
30 (BSESN)
|
|
|
|
|
|
|
Name
|
Market Cap
|
Revenue
|
Ratio
|
Beta
|
EPS
|
Dividend
|
Next Earnings Date
|
AXIS Bank
|
2.26T
|
430.58B
|
17.88
|
1.48
|
41.16
|
-
|
Apr 26,
2022
|
Asian
Paints
|
2.93T
|
278.60B
|
95.75
|
0.54
|
31.62
|
18.15 (0.6%)
|
May 12, 2022
|
Bajaj
Finance
|
4.24T
|
298.56B
|
71.17
|
1.78
|
98.37
|
10 (0.14%)
|
May 19,
2022
|
Bajaj
Finserv
|
2.62T
|
649.61B
|
62.83
|
1.7
|
262.93
|
3 (0.02%)
|
May 19, 2022
|
Bharti
Airtel
|
4.42T
|
1,107.94B
|
136.3
|
0.73
|
5.38
|
-0.0058
|
May 17,
2022
|
Dr. Reddys
Labs
|
715.80B
|
208.39B
|
26.96
|
0.21
|
158.93
|
25 (0.58%)
|
May 13, 2022
|
HCL Tech
|
3.17T
|
826.95B
|
28.69
|
0.86
|
40.57
|
42 (3.61%)
|
May 12,
2022
|
HDFC Bank
|
7.97T
|
848.01B
|
22.11
|
1.09
|
64.81
|
6.5 (0.45%)
|
Apr 16, 2022
|
Hindustan Unilever
|
4.66T
|
511.12B
|
52.98
|
0.26
|
37.28
|
32 (1.62%)
|
May 11,
2022
|
Housing
Development Finance
|
4.19T
|
1,366.18B
|
19.16
|
1.15
|
118.4
|
23 (1.01%)
|
May 02, 2022
|
ICICI Bank
|
4.94T
|
793.50B
|
22.55
|
1.34
|
31.5
|
2 (0.28%)
|
Apr 23,
2022
|
ITC
|
3.14T
|
628.55B
|
21.39
|
0.71
|
12.02
|
11 (4.28%)
|
May 18, 2022
|
IndusInd
Bank
|
722.30B
|
191.02B
|
16.7
|
2.27
|
55.99
|
5 (0.53%)
|
Apr 21,
2022
|
Infosys
|
7.84T
|
1,156.76B
|
36.86
|
0.63
|
50.84
|
30 (1.6%)
|
Apr 13, 2022
|
Kotak
Mahindra Bank
|
3.43T
|
295.18B
|
31.73
|
0.97
|
54.37
|
0.9 (0.05%)
|
May 02,
2022
|
Larsen
& Toubro
|
2.45T
|
1,517.58B
|
28.96
|
1.14
|
60.14
|
18 (1.03%)
|
May 30, 2022
|
Mahindra
& Mahindra
|
861.59B
|
856.92B
|
14.56
|
1.48
|
52.83
|
8.75
(1.14%)
|
May 31,
2022
|
Maruti
Suzuki
|
2.28T
|
856.15B
|
69.61
|
1.13
|
107.42
|
45 (0.6%)
|
Apr 26, 2022
|
NTPC
|
1.30T
|
1,256.87B
|
9.12
|
0.72
|
14.78
|
7.15 (5.3%)
|
May 30,
2022
|
Nestle
India
|
1.64T
|
147.09B
|
75.79
|
0.25
|
222.46
|
175 (1.04%)
|
May 12, 2022
|
Power Grid
|
1.48T
|
414.41B
|
9.15
|
0.48
|
23.21
|
18.5
(8.72%)
|
May 31,
2022
|
Reliance
Industries
|
17.68T
|
6,646.43B
|
30.18
|
1.14
|
86.87
|
7 (0.27%)
|
Apr 29, 2022
|
SBI
|
4.43T
|
1,982.53B
|
13.89
|
1.48
|
35.81
|
4 (0.8%)
|
May 26,
2022
|
Sun Pharma
|
2.18T
|
377.31B
|
33.78
|
0.65
|
26.82
|
9 (0.99%)
|
May 31, 2022
|
Tata
Consultancy
|
13.69T
|
1,848.68B
|
36.44
|
0.64
|
101.75
|
36 (0.97%)
|
Apr 21,
2022
|
Tata Steel
Ltd
|
1.63T
|
2,780.36B
|
3.54
|
1.28
|
378.53
|
25 (1.87%)
|
May 18, 2022
|
Tech Mahindra
|
1.34T
|
422.60B
|
26.23
|
0.71
|
58.12
|
15 (0.98%)
|
May 24,
2022
|
Titan
Company
|
2.26T
|
284.96B
|
101.15
|
0.85
|
25.07
|
4 (0.16%)
|
May 12, 2022
|
UltraTech
Cement
|
1.88T
|
512.45B
|
27.11
|
0.88
|
234.59
|
37 (0.58%)
|
Apr 25,
2022
|
Wipro
|
3.29T
|
744.79B
|
27.23
|
0.39
|
22.05
|
6 (1%)
|
Apr 20, 2022
|
So, how are these
30 companies selected?
The
BSE`s criteria for selecting these companies are as followed:
1.
BSE-listed
stock: The stock should have a listing history of at least one year on BSE to
be considered.
2.
Market Capitalization:
The Company should be in the Top 100 companies listed by full market capitalization.
3.
Trading
frequency: The Security should have been traded on each and every trading day
for the last year, BSE says. Exceptions to this can be made in case of
extreme reasons.
4.
Average
Daily Trades and Average Daily Turnover: The Security should be in the Top 150
firms listed by the average number of trades per day and by the average value of shares
traded per day for the last year.
5.
In the
opinion of the Index Committee, the firm should have an acceptable track
record, BSE says on its website.
6.
The Index
Committee meets every quarter to review all the BSE indices including SENSEX.
However, every review meeting may or may not lead to a change in the
constituents.
How is Sensex
different from Nifty?
- Nifty is the benchmark index of the National Stock Exchange.
‘National Fifty’ make up Nifty.
- The major difference between Sensex and Nifty is the number of
constituents.
- While Nifty 50 constitutes the top 50 companies actively traded in
NSE, Sensex comprises the top 30 companies actively traded in BSE.
- Today Sensex is more niche, and on the other hand, Nifty is
broader as it has 50 firms.
Selection of Sensex
constituents
The stocks on the Sensex Today are chosen based on the
following factors
- Industry representation: Only industry heavyweights are chosen to
represent their sector.
- Market capitalization: The Company’s market cap should be among the
top of the index. Also, it should be more than 0.5% of the index’s total
market cap.
- Frequency of trading: The Company should be active (live) on the
exchange for at least one year. The exemption can be made in specific
situations like share suspension, etc.
- Average daily trade: The average number of shares traded per day
last year should be among the Top 150.
- Average daily turnover: The average value of the shares traded per
day in the last year should be among the Top 150.
Free-float market capitalization methodology
The constituents of the Today Sensex are
calculated according to the free-float market capitalization method. Free float means the total number of shares available to the public for trade. This
excludes promoter holding or any holding apart from the public. Consequently, a
company’s free-float market cap would be, the number of shares available to the public
* the market price of each share. So, if a company has 20 lakh shares available to
the public, and each share is valued at Rs150, the free-float market
capitalization of the company will be 20,00,000*150 = Rs30cr.
However, it should be kept in mind that the
Sensex constituents are market leaders and each of them easily has a market
cap ranging in ‘thousand crores’.
How has the Today Sensex
Performed in Recent Decades?
The Today
Sensex has grown at a compounded rate of roughly 14% between 1986 and
2021. This growth reflects the substantial growth of the Indian economy during
that time frame, particularly the expansion of that nation’s middle class. The
Sensex declined by nearly 40% in March 2020 during the coronavirus health
crisis but recovered strongly over the remainder of the year. Today Sensex set
a new all-time high as of February 2021.
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INDEX FUNDS
Index funds are a type of fund that replicates
a specific index in their investment portfolio. The investors may aim to
generate similar returns as the index it is replicating. The indices that such
index funds might track may include S&P BSE Senses, etc.
As such, index funds are suitable for investors
with longer investment horizons who are comfortable with the returns generated
by the broader market indices instead of aiming to outperform the market. Since
the portfolio of the index funds must be the same as the composition of the
underlying index, these funds will not be able to operate any alpha in any
market.
We can say in simple words index funds are a
type of mutual fund. A mutual fund is a kind of a bunch of money owned by a
bunch of people. Back in the day, mostly all types of mutual funds were
actively managed. It means a smart manager was paid to take all the money and
buy many stocks with it at his discretion.
The people interested in investing would put
some money into the mutual fund, and they would put some money into the mutual
fund, and they would get a bit of all the stocks the confident guy concludes to
buy. It was a nice way to diversify your portfolio without doing all the
research and trading yourself.
Index funds are a preselected collection of
hundreds or thousands of stocks, and bonds. These are being designed to mimic a
given market or index.
An index fund is a passive investment vehicle
with a portfolio of stocks designed to imitate the portfolio of a financial
market index. It is an investment strategy with relatively little trading, few
brokerages, etc. these funds provide balanced, risk-managed returns with
possibly better long-term results.
Why invest in an
Index?
- Passive investing - Eliminates stock selection risk and fund
managers` discretion.
- Low costs - Saves on the cost of research and frequent portfolio
churn. Maximum expenses capped @ 1.5%.
- Low costs - The scheme invests as per the index and sticks to the
mandate.
- Difficult to outperform - Globally, over 3 and 5 years, S&P 500
has beaten 64.9% of the large-cap funds, and the S&P Midcap 400 has
outperformed 80.5% of midcap funds.*
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