In this article, we will discuss
- What is BSE Sensex?
- What Is the S&P 500 Index?
- What is FTSE 100?
- Sensex vs S&P500 VS FTSE100
- How to invest in Foreign Stocks?
Criteria to be included in Sensex:Companies need to meet the below 5 criteria to be a part of the Sensex
- The company must be listed on BSE for at least three months
- Must be a large or mid-cap company
- The stock should be highly liquid meaning easy to buy and sell
- Company to have reported a substantial part of its revenue from its core business operations
- Sector weightage of the company
What Is the S&P 500 Index?The Standard & Poor's 500 Index 500 was formally launched in 1957. It is an index of 500 publicly traded companies in the U.S.The S&P 500 index is regarded as one of the best gauges of prominent US equities and the overall US stock market performance and the economy. This index is widely considered a standard benchmark for large-cap equities.Since its inception, the index has generated a compound annual growth rate (CAGR) of roughly 10.67%, including dividends.
S&P Index Criteria: Eligibility RequirementsTo be eligible for inclusion in the S&P 500 index, the following criteria must be met:
- Minimum Market Capitalization should be USD 8.2 Billion
- Company to be based in the U.S. with Common Stock in Capitalization
- Listed on an eligible U.S. Exchange like e.g. NYSE, NASDAQ
- The earnings in most recent quarter should be positive. Earnings should also be positive for the Trailing Twelve Months (TTM) basis – i.e. the sum of the most recent historical four quarters
How is the S&P500 calculated?The S&P 500 uses a market cap weighting method, which gives a higher percentage allocation to companies with the largest market capitalizations. The weighting of each company is calculated by taking the company's market cap and dividing it by the total market cap of the index.
Company Weighting = Company’s market cap/ Total of all market capsThe information technology (IT) sector is the most significant contributor to the S&P 500 index with a contribution of 2.3%
What is FTSE 100?FTSE is short for ‘Financial Times Stock Exchange’, which is derived from – ‘Financial Times’ and ‘London Stock Exchange’, the two companies that launched FTSE. The ‘100’ in ‘FTSE 100’ represents the number of stocks in the index.The FTSE 100 is an index made up of shares from 100 top companies by market capitalisation on the London Stock Exchange (LSE). The price of the index is determined by the price movement of these constituent stocks.Criteria to be included on the FTSE 100 include:
- The company must be listed on the LSE,
- It must be denominated in pounds,
- It must meet minimum float and stock liquidity requirements.
Sensex vs S&P500 VS FTSE100Indices like the Sensex for India, FTSE 100 for the UK or S&P 500 for America contain very different companies, trade on very different valuations and will likely give different returns historically and going forwards.
Top stocks in the S&P 500 and FTSE 100
- Facebook inc A
- Alphabet Inc A (Google)
- Johnson & Johnson
- Berkshire Hathaway
- Procter & Gamble
- HSBC Holdings
- British American Tobacco
- Royal Dutch Shell A
- Rio Tinto
- Reckitt Benckiser
Historical returns:The average stock market returns over the last 10 years
|10 year CAGR|
|Year||Sensex||S&P 500||FTSE 100|