What Is Sensex and How It Works: The S&P BSE Sensex, commonly known as the Sensex, is India’s premier stock market index, serving as a barometer for the country’s economic health. Launched on January 1, 1986, by the Bombay Stock Exchange (BSE), it comprises 30 of the largest and most actively traded companies listed on the BSE.
What Is Sensex?
The term “Sensex” is a portmanteau of “Sensitive” and “Index,” coined by stock market analyst Deepak Mohoni in 1989. These 30 constituent companies are selected based on their market capitalization, liquidity, and sector representation, ensuring the index reflects the broader economic landscape of India.
How Does Sensex Work?
The Sensex is a free-float market capitalization-weighted index, meaning the weight of each stock in the index is proportional to its free-float market capitalization. This method excludes shares held by promoters and government entities, focusing on shares available for public trading. The index value is calculated by dividing the total free-float market capitalization of all 30 companies by a base value, which was set at 100 in 1978–79.
Why Is Sensex Important?
- Economic Indicator: The Sensex provides a snapshot of the Indian economy’s performance, reflecting investor sentiment and economic trends.
- Investment Benchmark: It serves as a benchmark for mutual funds and portfolio managers to assess the performance of their investments.
- Market Sentiment: Fluctuations in the Sensex can indicate market optimism or pessimism, influencing investor decisions.
Recent Milestones
The Sensex has witnessed significant growth since its inception. From a base value of 100 in 1979, it reached an all-time high of 85,836.12 points on September 26, 2024. This remarkable ascent underscores the robust growth of India’s financial markets and the increasing confidence of investors.
The S&P BSE Sensex stands as a testament to India’s dynamic economic journey. By tracking the performance of 30 key companies, it offers valuable insights into the health and direction of the Indian economy, making it an indispensable tool for investors and analysts alike.
