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All That You Need to Know About Sensex Today

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Whenever individuals are interested to enter the world of investments in stock markets then being aware of the very basic terminologies like Sensex, nifty 50, brokerage and various other kinds of things are very much important for them so that they can understand the terms perfectly and can ensure that right kind of decisions will be made by them in the long run. The term Sensex has been named by a stock market analyst Mr Deepak and the word is a combination of sensitive and index. The Sensex is the index that is very much capable of reflecting the Bombay Stock Exchange which got established in the year 1875. Till the year 1986, the stock exchange never had any of the official indexes and then came the introduction of the concept of Sensex. Sensex comprises 30 prominent stocks which are derived from different sectors and are actively traded in the whole exchange market. Sensex today reflects the Indian stock market and movement perfectly as well as truly. If the Sensex value is increasing it means that there is a general increase in the prices of shares and all the other hand if the Sensex value is decreasing then it will mean that there will be a decrease in the pricing value of the shares.

The boom and bust can be easily identified in the stock market with the help of Sensex and different people are coming up with alliances for Sensex as well. Sensex includes the 30 largest and most actively traded companies and is one of the oldest indexes in India. Sensex is also used to absorb the overall growth, development of industries, ups and downs of the Indian economy across all the investors.

The calculation methodology of the index has been explained as follows:

Historically the Sensex was based upon utilizing the weighted market capitalisation methodology but from the year 2003 there has been a shift in the utilisation of methodology and now it is based upon the below-mentioned formula:

Free float market capitalization= market capitalization*free flow factor. 

Free float is referred to as the percentage of the total shares which has been issued by a company and is readily available for trading into the market. It will also exclude the shares which are held by promoters and the government.

  1. The Sensex comprises 30 stocks which are set according to the criterion.
  2. The market capitalization of all the 30 companies has to be determined and then the free-float market capitalisation will be determined.
  3. Out of the other 30 companies the free-float market capitalisation has to be summed up to get a total of free-float market capitalisation.
  4. As the formula of Sensex has to be implemented the base year to calculate is 1978-79 and this is the static value that has not to be changed.
  5. The base index value is a hundred.

Hence, the above-mentioned system is the system being utilised by the concerned people to reach the proper calculations of Sensex. Also depending upon the best companies in this particular field for example 5paisa has now become a matter of necessity for the organizations and investors so that they can make the right kind of decisions based upon actionable insights provided by such companies.