Information on Stock Market - SENSEX and NIFTY

What is SENSEX?

This is one of the most repeated words in the Indian Economy. A very good understanding of the Stock market and SENSEX in particular is important for a student to crack a few of the questions come under Indian Economy. It is said that questions pertaining to stock markets are often asked in the Civil Service Interview. Following are the some important information regarding the Stock Market in general and other important indexes in particular.

What is Sensex?

The Sensex is an indicator. It is an indicator of all the major companies of the BSE (Bombay Stock Exchange)

We often hear that the Sensex has gone up or gone down. It brings great fluctuations in the Indian Economy. What does it mean? If the Sensex goes up, it means that the prices of the stocks of the major companies on the BSE ( thirty in number) have gone up. If the Sensex goes down, it means that the stock prices of most of the major stocks on the BSE have gone down.

BSE and NSE are the two major indices of Stock market.

SENSEX is an indicator of all the major companies (30) of the BSE, situated in Bombay.

NIFTY is an indicator of the all the major companies of NSE (National Stock Exchange), situated in Delhi.

Aren't there other stock markets in the country?
There are many, but they are not as popular as the two mentioned above. Most the stock trading in the country is done through the BSE and NSE.

Companies listed in SENSEX.

Sensex is calculated taking into consideration stock prices of 30 different BSE listed companies. Free-float market capitalization method is used to calculate the stock prices of these companies. The method for calculating the Sensex and the thirty companies are not stable; they change from time to time.

What is Free-float market capitalization?

To understand this term, you must know who hold the shares of the company. They can be the government, founders or directors of the company, and by FDI..

Only open market shares are free for trading by anyone. When we calculate the SENSEX, we are interested only in these “Free Float” shares.

Why only thirty companies??

The thirty companies are selected and reviewed from time to by and INDEX COMMITTEE consisting academics, mutual fund managers, finance journalists, independent governing board members and other participant in the financial markets.

What is the main criteria for selecting the stocks of thirty companies?

The company

1. should have a market capitalization in the Top 100 market capitalization of the BSE. Also the market capitalization should be more than 0.5% of the total market capitalization of the index.
2. The company should be traded on each and every trading day for the last one year.
3. The scrip should be among the top 150 companies listed by average number of trades per day for the last one year.
4. The companies should be leaders in their industry group.
5. The company should have a listing history of at least one year on BSE.
6. The company should have an acceptable track record.