- What is BSE?
- Who introduced BSE Sensex?
- Criteria for selection of 30 stocks for BSE Sensex
- How is Sensex calculated?
- How Sensex Works?
What is BSE?BSE or Bombay Stock Exchange, established in 1875 is the oldest stock exchange in Asia. It was started under the name "The Native Share & Stock Brokers Association" in 1875. Today, BSE is the 10th biggest stock exchange in the world with a record order matching speed of 6 microseconds! [Suggested Reading: What is NSE & BSE? | NSE or BSE, Which is better?]
Who introduced the term ‘Sensex’?Mr Deepak Mohoni, an Indian stock market analyst introduced the benchmark index, ‘TheSensitivity Index', popularly known as ‘Sensex’. Sensex is the oldest index in India and is known as a reflection of the Indian economy. It was first compiled in 1986 and comprises of 30 most actively traded stocks on BSE.List of BSE Sensex Stocks Let us now see how these 30 stocks reflecting the pulse of the Indian economy are selected.
Criteria for selection of 30 stocks for BSE SensexSensex is a basket of 30 stocks which represents a sample of large, liquid and representative companies.These stocks are selected on the following criteria:
- The stocks should be listed on BSE
- It should be a large to mega-cap stock
- Relatively liquid stocks
- High revenue generating companies
- A diversified and balanced sector involvement with the Indian equity market.
- Free float factor
- Market capitalization
How is Sensex calculated?Initially, the index was calculated based on the 'market capitalisation' method. But since September 1, 2003, Sensex is calculated as per the ‘free-float’ method.Globally, the Free Market Capitalization Method is regarded as industries best practice used by S&P, Dow Jones, etc.
- 30 companies are selected as per the set criteria of Sensex.
- Determine the market capitalization of these 30 stocks
- Determine the free-float market capitalization of these 30 stocks
- Sum up the free-float market capitalization of all the 30 stocks
- Base market capitalization as per BSE is Rs. 2501.24 crore
- The base index value is 100
How Sensex works:
- If Sensex goes up, it means the aggregate prices of the underlying 30 stocks have increased.
- If the Sensex goes down, it means the aggregate prices of the underlying 30 stocks have decreased
How to trade in companies listed on BSE Sensex?Since you now understand how Sensex is calculated and how it works, let us understand. step-by-step, how to trade in companies listed on BSE Sensex.
- Firstly, open a trading and Demat account. Fortunately, you don’t have to look far, as Samco has been awarded as the best equity stock broker in India by CNBC – Awaaz and is a leader in providing the most technologically advanced Demat account in India.
- Once your Demat account is opened, you simply need to transfer funds from your bank account to your trading account and start trading on NSE or BSE!