What is Sensex - Meaning, Milestones, Calculation
What is Sensex - Meaning, Milestones, Calculation
May 10, 2023
5 Minutes
Unlocking the Growth Trajectory: A Comprehensive Guide to Sensex
The Sensex, officially known as the S&P BSE Sensex, stands as a stalwart in the realm of the Indian stock market, encapsulating the economic pulse through its composition of 30 prominent companies listed on the Bombay Stock Exchange (BSE). Created in 1986 by the insightful Deepak Mohoni, the term Sensex is a fusion of 'Sensitive' and 'Index,' reflecting its sensitivity to market fluctuations.
Evolution and Criteria:
1. Selection Criteria:
The Sensex's lineup comprises companies that undergo rigorous scrutiny by the S&P BSE Index Committee. Criteria include BSE listing, large/mega-cap status, liquidity, core activity-driven earnings, and a contribution to sector equilibrium.
2. Growth Phases:
In the early 1990s, the Sensex witnessed significant growth, with a pivotal moment in 2002 as it surpassed the 6000 mark, propelled by contributions from the burgeoning information technology sector.
Calculation Methodology:
1. Transition in Methodology:
The calculation methodology has evolved from a market capitalization-based weighted approach to a free-float capitalization method since 2003. This transition incorporates the number of shares available for sale, enhancing precision. The formula involves multiplying Market Capitalization by the Free Float Factor.
Investing in Sensex:
1. Procedural Steps:
To partake in Sensex investments, aspiring investors need to embark on a systematic journey. Initiating a Demat account for electronic shareholding, complemented by a trading account for online securities transactions, is paramount. Additionally, possessing a bank account and PAN card is mandatory for seamless Sensex trading.
Milestones and Historical Landmarks:
1. Growth Trajectory:
Sensex has etched numerous milestones in its illustrious history. The index surged past the 1000 mark in 1990, and the 5000 mark in 1999. In the 21st century, it achieved unprecedented highs, breaching the 10,000 mark in 2006, the 20,000 mark in 2007, and the 40,000 mark in 2019.
2. Economic Downturns:
Despite its upward trajectory, Sensex has weathered significant downturns. The 2008-2009 stock market crash, triggered by the global financial crisis, and setbacks like the Harshad Mehta scam in 1992 and the Satyam fraud in 2009, led to substantial declines.
Resilience and Global Attraction:
1. Steady Growth Amidst Fluctuations:
Sensex, despite grappling with periodic uncertainties and market fluctuations, has demonstrated resilience and steady growth over the past three decades.
2. Global Investor Magnet:
Remaining a key indicator of the Indian stock market, Sensex continues to attract investors worldwide, offering a glimpse into the economic vitality and investment potential of the nation.
In conclusion, the Sensex stands as a testament to the dynamic nature of the Indian stock market. Its evolution, calculated methodology, and resilience underscore its significance as a barometer of economic health, guiding investors through the complex terrain of market dynamics. As the Sensex journey unfolds, it remains a beacon, illuminating the path for both seasoned and budding investors.
Unlocking the Growth Trajectory: A Comprehensive Guide to Sensex
The Sensex, officially known as the S&P BSE Sensex, stands as a stalwart in the realm of the Indian stock market, encapsulating the economic pulse through its composition of 30 prominent companies listed on the Bombay Stock Exchange (BSE). Created in 1986 by the insightful Deepak Mohoni, the term Sensex is a fusion of 'Sensitive' and 'Index,' reflecting its sensitivity to market fluctuations.
Evolution and Criteria:
1. Selection Criteria:
The Sensex's lineup comprises companies that undergo rigorous scrutiny by the S&P BSE Index Committee. Criteria include BSE listing, large/mega-cap status, liquidity, core activity-driven earnings, and a contribution to sector equilibrium.
2. Growth Phases:
In the early 1990s, the Sensex witnessed significant growth, with a pivotal moment in 2002 as it surpassed the 6000 mark, propelled by contributions from the burgeoning information technology sector.
Calculation Methodology:
1. Transition in Methodology:
The calculation methodology has evolved from a market capitalization-based weighted approach to a free-float capitalization method since 2003. This transition incorporates the number of shares available for sale, enhancing precision. The formula involves multiplying Market Capitalization by the Free Float Factor.
Investing in Sensex:
1. Procedural Steps:
To partake in Sensex investments, aspiring investors need to embark on a systematic journey. Initiating a Demat account for electronic shareholding, complemented by a trading account for online securities transactions, is paramount. Additionally, possessing a bank account and PAN card is mandatory for seamless Sensex trading.
Milestones and Historical Landmarks:
1. Growth Trajectory:
Sensex has etched numerous milestones in its illustrious history. The index surged past the 1000 mark in 1990, and the 5000 mark in 1999. In the 21st century, it achieved unprecedented highs, breaching the 10,000 mark in 2006, the 20,000 mark in 2007, and the 40,000 mark in 2019.
2. Economic Downturns:
Despite its upward trajectory, Sensex has weathered significant downturns. The 2008-2009 stock market crash, triggered by the global financial crisis, and setbacks like the Harshad Mehta scam in 1992 and the Satyam fraud in 2009, led to substantial declines.
Resilience and Global Attraction:
1. Steady Growth Amidst Fluctuations:
Sensex, despite grappling with periodic uncertainties and market fluctuations, has demonstrated resilience and steady growth over the past three decades.
2. Global Investor Magnet:
Remaining a key indicator of the Indian stock market, Sensex continues to attract investors worldwide, offering a glimpse into the economic vitality and investment potential of the nation.
In conclusion, the Sensex stands as a testament to the dynamic nature of the Indian stock market. Its evolution, calculated methodology, and resilience underscore its significance as a barometer of economic health, guiding investors through the complex terrain of market dynamics. As the Sensex journey unfolds, it remains a beacon, illuminating the path for both seasoned and budding investors.
Author
Pluto Team
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