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What is BSE Sensex and How to Calculate BSE Sensex Index?

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BSE Sensex stands for Bombay Stock Exchange sensitive index. The BSE is set as the benchmark for the Indian stock market. So far, the BSE Sensex index has 30 top companies listed. Bombay Stock Exchange was established back in 1986. The stock exchange like BSE can provide insightful data on the overall economic health of stocks. If you are interested in stock trading, understanding the BSE Sensex meaning can be crucial.

How to Calculate the BSE Sensex Index?

The sensitive index of BSE is calculated as per a specific methodology. All the stocks listed on the BSE are calculated for their weighted average of the price to determine the index of BSE. Now, you may be wondering how the weightage is decided. Well, the stock weightage depends on the market capitalisation of the particular stock. Market capitalisation is determined by multiplying stock prices by the total number of outstanding shares. The base year taken is 1978-79 and a base value of 100.

Additions, removal, or changes in the stock are done as per the pre-determined method of BSE Sensex. The calculations of the index are based on computer system complexities to ensure the authenticity of the results. To understand what is BSE Sensex, you must be aware of how it is calculated. The basic formula for calculating the index is called the free-float capitalisation method and this is:

Free Float Market Capitalisation = Market Capitalization x Free Float Factor

Components of BSE Sensex

BSE SENSEX, as per the official website of the BSE SENSEX, there are multiple components displayed on the website. Each component has its own meaning and value. These components include a list of the top 30 high-performing companies listed on the BSE. Some of these may include Adani Ports And Special Economy, Asian PAINTS Ltd., AXIS Bank Ltd., Baja Finance Ltd., Bajaj Finserv Ltd., HDFC Bank Ltd., and so on. The list may differ as per the changing market trends on each trading day.

Other components of the BSE SENSEX include the ISIN number and closing price of the particular stock company. ISIN stands for International Securities Identification Number. ISIN is a unique 12-character alphanumeric code given to a financial instrument. Close price indicates the price at which the stocks of the company were closed on a particular trading day.

Understand the Difference Between BSE And SENSEX

You may have used the terms BSE and SENSEX together. However, these two words have different meanings, functions, and operations. While BSE stands for Bombay Stock Exchange, SENSEX stands for Sensitive Index. Check out the major differences between BSE and SENSEX:

Bombay Stock Exchange (BSE)

Sensitive Index (SENSEX)

Bombay Stock Exchange is India's oldest stock exchange platform

Sensex is the index used to measure the performance of 30 companies listed on the BSE

BSE is a trading platform for investors and traders

Sensex is the measurement index for BSE

Investors can buy and sell stocks at Bombay Stock Exchange

Sensex acts as the key indicator of the stock health of the Indian market

Bombay Stock Exchange was established in 1875

The stock market index, SENSEX was established in 1986

BSE lists over 5000 companies

SENSEX measures the performance of the top 30 listed companies

BSE facilitates trading by allowing the buying and selling of stocks

SENSEX tracks the market performance of top-listed companies

These were the major differences between the BSE and the SENSEX. It may be clear to you that while BSE is a trading platform with over 5000 listed companies, SENSEX is the indexing platform that tracks the performance of the top 30 listed companies of BSE. Like BSE, which has SENSEX as the measurement index, the National Stock Exchange (NSE) has NIFTY as its measurement index.

Factors Affecting BSE Sensex

Various factors affect the BSE SENSEX index and its performance calculation. These may include government policies and regulations. While a favourable policy can positively impact the SENSEX, a negative one can show a downtrend in the stock exchange. Next, the changes in monetary policies of banks, especially by the Reserve Bank of India can have a direct impact on the stock exchange. An increase in interest rates can discourage the purchase of new stocks while a decrease in interest rates can have a reverse effect.

Geopolitical activities can also impact the overall stock exchange health. Tensions across countries and disturbed geopolitical scenarios can have a disturbing effect on the stock market as well. Along with these, changes in the FOREX (Foreign Exchange) will also have an impact on the BSE SENSEX. Changes in foreign currency values will affect the FDI (Foreign Direct Investments) and eventually witness a decrease in the Indian stocks by foreign investors.

These are some of the factors that can trigger an increase or decrease in the stock market investments. It is best to stay updated on national and global happenings along with having a detailed insight into the stock dynamics to be able to maximize your profit through stock trading.

How to Track BSE Sensex?

Tracking the BSE SENSEX index can be crucial for investors and traders. Without detailed insight into the market and BSE movements, it can be difficult to choose the best stock deals. One of the ways in which the BSE SENSEX can be tracked is the official website of the Bombay Stock Exchange. 

BSE website shows real-time updates of stocks. The website contains details like SENSEX data, current values of stocks, percentage changes in stock values, and more. Other than the website of the Bombay Stock Exchange, various financial and business news channels also display BSE updates.

Conclusion

Bombay Stock Exchange, being the oldest stock exchange in India is also the most popular stock exchange platform. For decades, BSE has sustained and continues to provide a dedicated trading platform for buying and selling of stocks. SENSEX, on the other hand, helps in identifying the top 30 best-performing listed BSE companies. It helps investors get a clearer idea of how well a company is performing. As discussed above, SENSEX can be affected by multiple factors. Now that you know what is BSE meaning, make sure you keep an eye on global, national, and financial news to ensure profitable stock trading.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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Frequently Asked Questions

What is the meaning of BSE Sensex?

Answer Field

The Bombay Stock Exchange Sensitive Index is the BSE SENSEX meaning. BSE is primarily a trading platform where investors and traders can buy and sell stocks of over 5000 listed companies. SENSEX lists the top 30 best-performing companies listed on the Bombay Stock Exchange. Now that you

How is the BSE Sensex index calculated?

Answer Field

The formula to calculate the BSE SENSEX index is:

Free Float Market Capitalization = Market Capitalization x Free Float Factor

What are the components of the BSE Sensex?

Answer Field

BSE SENSEX comprises of top 30 companies that are performing best on the Bombay Stock Exchange, the scrip code of the companies, their ISIN numbers, and closing price.

Why is the BSE Sensex important for investors?

Answer Field

As investors, you may want to invest in the most profitable stocks. SENSEX helps identify the top-performing companies. It becomes easier to track the stock as per your preference while also keeping in mind the market performance of various stocks.

How often is the BSE Sensex updated?

Answer Field

The BSE SENSEX is updated at the end of each trading day.

What are the factors affecting the BSE Sensex movement?

Answer Field

Not one or two, but multiple factors affect the BSE SENSEX index. These include foreign currency value in terms of Rupees, geopolitical activities, foreign tensions, political stability/disturbances, changes in the banking sector regulations like interest rates increase/decrease by the RBI, etc.

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