Goseeko blog

What is Sensex?

by Uddipana Gogoi

Sensex refers to the benchmark index of the BSE in India. It was created in 1986 and is the oldest stock index. BSE sensex comprises 30 of the largest and most actively traded stocks on the BSE and provides a gauge of India’s economy. It is a free-float market-weighted stock market index . Standard & Poor’s (S&P) operates the Sensex. Moreover, it is calculated in Indian rupees (INR) and U.S. dollars. As of Aug. 31, 2021, the mean total market cap of the index was 3.71 trillion rupees. The top five constituents listed on the index were:

  • Reliance Industries
  • HDFC Bank
  • Infosys
  • Housing Development Finance Corp.
  • ICICI Bank

The S&P BSE index Committee selects its constituents based on several criteria:

  • Firstly, shares are listing on BSE.
  • Secondly, they should be a large-to mega-cap company.
  • Than, the stocks should be relatively liquid.
  • Thereafter, the companies should generate revenue from core activities.
  • Finally, they should keep the sector balanced broadly in line with the Indian equity market.

Objectives of Sensex

  1. To measure Market Movements: Given its long history and its wide acceptance, no other index matches the S&P BSE SENSEX in reflecting market movements and sentiments. S&P BSE SENSEX® describes the mood in the Indian Stock markets.
  1. Benchmark for Funds Performance: The inclusion of Blue chip companies and the wide and balanced industry representation in the S&P BSE SENSEX makes it the ideal benchmark for fund managers to compare the performance of their funds.
  1. For Index Based Derivatives Products: Institutional investors, money managers and small investors all refer to the S&P BSE SENSEX for their specific purposes The S&P BSE SENSEX is in effect the proxy for the Indian stock markets. Since S&P BSE SENSEX  comprises leading companies in all the significant sectors in the economy, we believe that it will be the most liquid contract in the Indian market and will garner a pre-dominant market share.

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