Basics about Sensex and its Calculations.

The Sensex basically means sensitive index and it is a commonly used term for the Bombay Stock Exchange Sensitive Index. The sensex tracks the movements of the 30 largest stocks and it is the oldest index in India.The Nifty is an indicator of all the major companies of the National Stock Exchange. Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE. Nifty is also called as National Fifty.

The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. So some companies can be deleted and some can be added in it with time.

Calculation of Sensex

Sensex is calculated using the “Free-float Market Capitalization” methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. Now, only the “open market” shares that are free for trading by anyone(excluding shares with government etc.). These are called the “free-float” shares. In all Major share market in world same procedure is followed for calculations.

Like any other index – it tells you how the stock market is performing at any given time – a higher Sensex means share prices are higher, and a lower Sensex means share prices are lower and that share price movement is captured in the form of free float market capital in the Sensex.

Bullish Market means a trend in the stock showing clear signs of recovery and Capital Gain. Bearish market is a general decline in the stock market over a period of time

( List of current Sensex Companies can be viewed here : http://www.bseindia.com/SensexView/SensexView.htm )