What is sensex and how it is calculated | for newbies

If you want to know about stock market then it is very important to know What is sensex and how it is calculated . I will try to give you information about What is sensex , what it means and how it counts, in simple Language.

Here is the post about ” What is Sensex ?”

When you think about investing in stock market / Share Market or want to know about it. first of all, this question comes out that ” what is the Sensex “.

Consider Reading : What is Nifty ? And how it is Calculated ?

What is the significance of it in share market ?


Sensex is a short form of sensitivity index. The Bombay Stock Exchange is the sensitized index of the Bombay Stock Exchange, which is short-term, based on the top 30 shares of BSE 30 or BSE Sensex.

Like Sensex, Nifty is also an index of the National Stock Exchange and is based on fifty shares there.

Consider Reading : What is Exchange Traded Fund ( E.T.F ) and how it is calculated.

Let me tell you here that the list of these 30 shares varies from time to time and Bombay Exchange keeps changing this list according to the market share, but the number of shares in the index remains only thirty.

S & P BSE Sensex (S & P Bombay Stock Exchange’s Sensitive Index), a free float market-weighted stock market index of 30 established and economically strong companies listed in the Mumbai Stock Exchange is.

Out of the largest and most active trading shares of BSE, 30 such companies are taken, which represent various industrial areas of the Indian economy. This index of thirty shares is called a Sensex.

Published since 1 January 1986, BSE Sensex is considered as the pulse of domestic share markets in India. The base price of the S & P BSE Sensex took 100 as the day of April 1, 1979 and it was the base year of 1978-1979.

Let me tell you here that the list of these 30 shares varies from time to time and changes the list according to the BSE requirement, but the number of shares in the index remains only thirty.

How to count Sensex:

As I mentioned, the Sensex is a free-float market-weighted stock market index. Free float means easy to swap in i.e Free to move .

Market capitalization of any company . that is part of Market Capitalization which can be available in the market for sale. it will be free float market capitalization and on the basis of that the Sensex is calculated.

Generally, if the share of promoters or part of government is withdrawn from the capital, then the remaining amount may be available for sale in the market.

Market Capitalization or Market Capitalization.

It can also call Market Cap or market capitalization. This can be achieved by multiplying the number of shares issued by the company/ by the market price per share.

Read More : What is Market Capitalization ?

If a company has issued 1 lakh shares of Rs 10 rupees, then the company’s capital is Rs 10 lakh. Now if the price of this company’s stock is sixty rupees in the market. then the company’s market cap or market capitalization will be 6 million.

Now if the share of promoters in this company is 40% and share of the public is 60% then this company will have a free float factor of 0.6. That is, to calculate the index, 60% of the market capitalization of this company will be considered as an effect.

Thus, free index is derived from full index and it is divided by the index divisor. This index is based on an increase in market capitalization of the base year of 1978-1979.

Suppose the market capitalization was 50000 in the base year. and the market capitalization of the day on which the index is to be calculated is 12000000. then the index separator will be 100/50000 and the index will be calculated 12000000 x 100/50000 = 24000 .

It was my attempt to explain Sensex in Simple language for newbies . Hopefully you have understand what the Sensex is and how it counts.

If you have some information about Sensex then it will be easy to understand the work of the stock market Share Market.

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