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SENSEX
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What is SENSEX?

The sensex short form of BSE-sensitive index, is a market

capitalization weighted index of 30 stocks representing a

sample of large well established and financially sound

companies.

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History of SENSEX

Sensex, first compiled in 1986, is an index of BSE, situated

in financial capital of India (Mumbai) was calculated on aMarket Capitalization-weighted methodology of 30

component stocks. Since September 1, 2003, SENSEX is

being calculated on free-float market capitalization

methodology.

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Objective of SENSEX

The SENSEX is the benchmark index of Indian capital

market with wide acceptance among individual investors,institutional investors, foreign investors and fundmanagers.

Main objectives are:-

To measure market movements.Benchmark for fund performance.

For index based derivative products.

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Objective Of SENSEX

To measure market movementsGiven its long history and its wide acceptance, no other index matchesthe SENSEX in reflecting market movements and sentiments.SENSEX is widely used to describe the mood in the Indian Stockmarkets.

Benchmark for funds performanceThe inclusion of blue chip companies and the wide and balanced

industry representation in the SENSEX makes it the ideal benchmarkfor fund managers to compare the performance of their funds.

For index based derivative productsInstitutional investors, money managers and small investors all refer tothe SENSEX for their specific purposes The SENSEX is in effect theproxy for the Indian stock markets. The country's first derivative

product i.e. Index-Futures was launched on SENSEX.

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Base year

Base index value

Date of launch

Method of calculation

1978-79

100

01-01-1986

Launched on full market capitalization method

shifted to free floated market capitalization.

No of scrips 30

Index calculationfrequency

15 seconds

Historical values for

SENSEX

Index,PriceEarnings,Price to book value ratio

and dividend yield %

Key points of BSE

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Criteria for listing of scrips

Quantitative criteria:-

Market capitalization

Liquidity

Trading frequency

Number of trades

Value of share traded

Continuity

Industry representation

Listed history

Qualitative criteria:-

Track record

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Market Capitalization

The scrip should figure in the top 100 companies

listed by market capitalization. Also market

capitalization of each scrip should be more than

0.5 % of the total market capitalization of theIndex i.e. the minimum weight should be 0.5 %.

Since the SENSEX is a market capitalization

weighted index, this is one of the primary criteria

for scrip selection. (Market Capitalization wouldbe averaged for last six months)

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Liquidity

Trading Frequency: The scrip should have been tradedon each and every trading day for the last one year.Exceptions can be made for extreme reasons like scripsuspension etc.

Number of Trades: The scrip should be among the top150 companies listed by average number of trades per dayfor the last one year.

Value of Shares Traded: The scrip should be among thetop 150 companies listed by average value of sharestraded per day for the last one year.

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Continuity

Whenever the composition of the index ischanged, the continuity of historical series of

index values is re-established by correlating the

value of the revised index to the old index (index

before revision). The back calculation over the lastone-year period is carried out and correlation of

the revised index to the old index should not be

less than 0.98. This ensures that the historical

continuity of the index is maintained.

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Industry Representation & Listed History

Industry Representation:

Scrip selection would take into account a balancedrepresentation of the listed companies in the universeof BSE. The index companies should be leaders intheir industry group.

Listed History:

The scrip should have a listing history of at least oneyear on BSE.

Industry Representation:

Scrip selection would take into account a balancedrepresentation of the listed companies in the universeof BSE. The index companies should be leaders intheir industry group.

Listed History:

The scrip should have a listing history of at least oneyear on BSE.

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Qualitative Criteria

Track Record:

In the opinion of the Index Committee, the

company should have an acceptable trackrecord.

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30 Most Traded Companies Of BSE

ACC

AIRTEL

BHEL

DLF

GRASIM

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30 Most Traded Companies Of

BSE

HDFC

HDFC BANK

HINDALCO

ICICI

INFOSYS

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ITC LIMITED

JAYPEE

L & T

M & M

MARUTI

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NTPC

ONGC

RELIANCE INFRA

RANBEXY

RELIANCE COMM

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RIL

SUN PHARMA

SBI

STERLITE

TATA MOTORS

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WIPRO

HUL

TCS

TATA STEEL

TATA POWER

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Calculation Of SENSEX

An index is calculated daily by tracking the share prices of itsconstituent member companies. SENSEX is calculated usingmarket capitalizationmethod. Every index is associated with baseyear. The base date for SENSEX is 1st April 1979 and base pointis 100.

The basic calculation of an index, on a particular date, involves

the following steps:

Calculate the market capitalization of each individual companycomprising the index. For example if a company has 195 millionshares outstanding and its closing price on that day at BSE wasRs.350 per share then its market capitalization on that date is

195*350= Rs.68,250 million.

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Calculation Of SENSEX

Calculate the total market capitalization (TMC) by adding the individualmarket capitalization of all the companies in the index. Assume that thetotal market capitalization of all companies in the index adds up toRs.26,175 billion on that date.

Computing of the index now requires the index value and total market

capitalization of the previous day. If on the previous day, the total marketcapitalization was Rs.25,310 billion and the index was 10635, the indexfor the next day is calculated as:

Index value=

Index on previous day TMC for current day/TMC of previous day

Thus, the index is 10,998 = (10,63526,175/25,310) implying that theindex rose by 363 points over the previous day.

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Free Float Index

An index based on the market capitalization weighted method takes

into account the total market capitalization of a company,regardless

of the number of share actually available for trading (that is,the ability

of free floating shares). The free float market capitalization methodon the other hand takes into account only the shares that are readily

available for trading. For example in the previous question , company

As market capitalization was Rs. 68,250 million as it had issued 195

million shares @ Rs.350. Of these, if only 75 million shares are

available for trading, then the market capitalization of free floatingstock of the company on that date would be Rs. 26,250

million(35075 million shares).

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1 Day Technical Analysis Chart of

Indian stock market BSE Sensex

Index

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5 Day Technical Analysis Chart of

Indian stock market BSE Sensex Index

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1 Year Technical Analysis Chart of

Indian stock market BSE Sensex Index

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Who are Bulls & Bears

Those who buy shares in anticipation of increasein prices are commonly referred to as bulls Andthose who sell shares anticipating a fall in pricesare referred to as bears. So a bullish market

implies a rising market since that is when the bullsor the buyers enter the field. Similarly, a bearishmarket refers to a falling market attracting the

bears or the sellers. One may play the bulls rolewith respect to one security and a bears role with

respect to another as one may anticipate that theprice of the former will rise and that of the latterwill fall.

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Financial Derivatives

The primary objective of investors in the capitalmarket is to maximize returns at level if riskacceptable to them. The portfolio needs to bemanaged for risk as much as it needs to bemanaged for returns. And this is where financial

derivatives come in .Financial derivatives arecontracts that are designed to minimize risk for theinvestors on their investments. For example,consider a share warrant issued by a company. Ashare warrant gives the holder the right, but not an

obligation to buy an underlying share at ascertainprice in future. Thus a share warrant is a derivativeof its underlying security.

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Financial Futures

Financial futures are contracts or obligations thathelp to lock-in the price at which one wishes to

buy or sell an asset in the future, to protect against

price changes. A future contract with equity shares

of an individual company as underlying assets likeshare, Equity indices, debt derivative instruments

is known as stock futures. Similarly, underlying

asset is stock market index, the contract is known

as index future.

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10 Biggest falls in SENSEX

No. Date Registered Fall

1 Jan 21, 2008 1408.35

2 Oct 24, 2008 1070.63

3 March 17, 2008 951.03

4 Jan 22, 2008 857

5 Feb 11, 2008 833.98

6 May 18, 2006 826

7 Oct 10, 2008 800.10

8 March 13, 2008 770.63

9 Dec 17, 2007 769.48

10 Jan 07, 2009 749.05

SENSEX CRASH
http://www.muchmind.com/histories/sensex-22-may-06.htmhttp://www.muchmind.com/histories/sensex-22-may-06.htm

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5 Biggest Single-day Gains

No. Date Close Prv Cls Net Chg % Chg

1 Jan 25, 2008 18361.66 17221.70 1139.92 6.6

2 Nov 14, 2007 19929.06 19035.48 893.58 4.7

3 Oct 23, 2007 18492.84 17613.99 878.85 5.0

4 Jan 23, 2008 17594.10 16729.94 864.13 5.2

5 Oct 09, 2007 18280.24 17491.39 788.85 4.5

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Key Staff Of BSE

Chairman: Mr.Jagdish Capoor

CEO: Mr.Rajnikant Patel

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Documents

25417574 What is Sensex