Tue. Nov 19th, 2019

What is SENSEX and how is it made?

What is SENSEX and how is it made?

Do you know what is SENSEX? You have often read or seen the word on TV or in the newspapers. Sometimes you see that Sensex went up by so many points today, and sometimes you see that the Sensex dropped by so many points today. Whenever you think about investing in the Share Market, then you must have come to Sensex. But you do not understand the meaning of these words because you do not know what Sensex is. Today, through this post, we will know what is Sensex and what is the work done through it?

We have told you in our earlier post what is nifty. Today we are talking about Sensex. So the Sensex is also like a nifty, but compared to the Nifty, only 30 companies are listed in the Sensex. Where Nifty is also called Nifty 50 as it lists 50 companies. Let us know about Sensex in detail.

What is SENSEX?

The term Sensex was introduced by Deepak Mohoni. This word is made up of sensitive and index words. This implies that it is a sensory index.

The SENSEX is the BenchMark index of our Indian stock market, which indicates the rise and fall in the prices of shares listed on the BSE (Bombay Stock Exchange). Through this, we get information about the performance of the 30 largest companies listed in it. Talking about Sensex, it is India’s oldest stock market index, which started in 1986.

Sensex which is a stock market index and its most important function is to look at the prices of all the shares of listed companies in the stock market and then after a day’s work give us an average value so that we are listed in the stock market One can easily get information about the boom and slowdown in the shares of companies.

The Bombay Stock Exchange (BSE), India’s oldest stock exchange, covers a total of 30 major Indian companies. These companies are very large in terms of market capitalization, it is currently 37% of the Indian GDP. These companies in a way work to set the trend of the Indian market. And simply put, the index created to assess the prices of the shares of the big companies of India, which keeps an eye on the rising prices of the shares of these companies, is called the Sensex.

How is Sensex made?

Now we have talked about what is Sensex? Now we will know how Sensex is made and who it is made by, we will understand the process of its formation.

As we know well, Sensex is a part of the Bombay Stock Exchange and the Sensex is made up of shares of only thirty companies listed on the Bombay Stock Exchange whereas the total number of companies listed on the Bombay Stock Exchange. The figure is more than 6000.

When the Sensex is calculated, only 30 companies that are prominent in the market are included in their shares. The reason behind the inclusion of stock prices of these 30 companies is that shares of these 30 companies are bought and sold the most. Secondly, it is the 30 largest companies, their market cap is about half of all the shares listed on the stock exchange, which is a huge achievement. The third reason is that these 30 companies are selected from 13 different sectors, these 30 companies are considered the biggest in their sector.

These 30 companies are selected by the index committee of the stock exchange. This committee consists of people from many sections, which can mainly include the government, banks, and well-known economists.

How does Sensex decrease or increase?

The job of the Sensex is to provide us with share information. It monitors the volatility in the shares of 30 companies under it. If the value of shares in the market of listed companies in the Sensex is increasing, then the Sensex also increases and goes up. At the same time, if the prices of shares in the market of listed companies in the Sensex are falling, then the Sensex also starts falling.

The most important reason for the share prices to go down and up is the performance of those companies. For example, if the company has launched a new and big project in the market, it is likely that the prices of the company’s shares will increase. Similarly, if the company is going through any difficulty, then people want to leave it and shares start being sold in large quantities. Due to the high volume of the stock, the share price decreases and the Sensex starts coming down.

On what basis are 30 companies selected?

The things that the index committee takes care of at the time of the election of 30 companies for inclusion in the Sensex are as follows:

  1. The shares of that company should be listed on the Stock Exchange for at least 1 year or more.
  2. It is mandatory to buy and sell the stock of that company on every day on which the stock market is open within the last year.
  3. According to the number and value of average daily trades, these companies must be among the largest 150 companies in the country.

These are the things that are taken into consideration by the index committee for listing.

What are the top 30 Best-Performing Companies:

The 30 companies involved in Sensex were first incorporated in 1986, all these companies are very financially powerful and also huge in market cap. The demand for shares of these companies is always in the stock market. Such companies are called “blue chip” companies. The Bombay Stock Exchange Sensex currently has a total of 31 companies. The list of companies listed on the BSE Sensex is as follows.

1. Adani Ports and Special Economic Zone Ltd.
2. Asian Paints
3. Axis Bank Ltd.
4. Bajaj Auto Ltd.
5. Bharti Airtel Ltd.
6. Cipla
7. Coal India Ltd.
8. Dr. Reddys Laboratories Ltd.
9. HDFC Bank Ltd
10. Hero MotoCorp Ltd.
11. Hindustan Unilever Ltd.
12. Housing Development Finance Corporation Ltd.
13. ICICI Bank Ltd.
14. ITC
15. Infosys Ltd.
16. Kotak Mahindra Bank Ltd.
17. Larsen & Toubro Ltd.
18. Lupin Limited
19. Mahindra & Mahindra Ltd.
20. Maruti Suzuki India Ltd.
21. NTPC Ltd.
22. Oil & Natural Gas Corporation Ltd.
23. Power Grid Corporation Of India Ltd.
24. Reliance Industries Ltd.
25. State Bank Of India
26. Sun Pharmaceutical Industries Ltd.
27. Tata Consultancy Services Ltd.
28. Tata Motors
29. Tata Motors – DVR Ordinary
30. Tata Steel Ltd.
31. Wipro Ltd.

At the moment these companies rule in the Indian market in away. All these companies are major companies in their respective sectors and each company represents its sector in the Sensex in away.

Benefits of Sensex:

As such, the biggest benefit of SENSEX is that through this, investors can know and understand the future changes in the market and according to them can invest their money properly.

But we also have some benefits from the SENSEX that they do not directly impact or benefit much but are quite useful indirectly. The movement of the rupee varies according to the market and when the rupee is strong then things are cheaper in the country. Let us know about some different benefits.

1. When companies see the Sensex going up, the investors also want to invest in such companies and when a lot of money is collected from the investors, the companies grow and expand. And whenever a company expands, it needs new people for it, then, in that case, they will give jobs to more people and this will directly mean a lack of unemployment.

2. When the stock market is good and the Sensex goes up, many foreign investors start coming in the country and when they invest money in Indian companies, then it will increase the rupee. And the rupee is strong against foreign currency. And when the rupee is strong, then things start becoming cheaper. For example, the salmon that comes in a foreign currency will get faster than rupees at lower prices.

Indian stock market is on the rise of successive heights. At one time when it started in 1990, the Sensex used to be just a thousand, but in today’s time, this figure has reached five digits, today it has crossed 30,000. Is and is creating new records every day. We hope that in future also it will touch new heights and help investors in making profits.

If you are unaware of the behavior of the market, then the stock market can be a risky investment for you. Invest in the stock market very thoughtfully and get complete information before investing.

Hope you have liked the information related to SENSEX.

Check out our previous – What is NIFTY and how is it different from SENSEX?

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