First compiled inSENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is and the base value is The index is widely reported in both domestic and international markets through print as well as electronic media.

Technical Analysis of Indian stock market BSE Sensex Index The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market.

As the oldest index in the country, it provides the time series data over a fairly long period of time From onwards. Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The SENSEX, short form of the BSE-Sensitive Index, is a "Market Capitalization-Weighted" index of 30 stocks representing a sample of large, well-established and financially sound companies.

Debenture

It is the oldest index in India and has acquired a unique place in the collective consciousness of investors. The index is widely used to measure the performance of the Indian stock markets. SENSEX is considered to be the pulse of the Indian stock markets as it represents the underlying universe of listed stocks at The Stock Exchange, Mumbai. Further, as the oldest index of the Indian Stock market, it provides time series data over a fairly long period of time since The SENSEX is the benchmark index of the Indian Capital Markets with wide acceptance among individual investors, institutional investors, foreign investors and fund managers.

The objectives of the index are: SENSEX is widely used to describe the mood in the Indian Stock markets. The country's first derivative product i. Index-Futures was launched on SENSEX. The scrip should figure in the top companies listed by market capitalization.

Also market capitalization of each scrip should be more than 0. Since the SENSEX is a market capitalization weighted index, this is one of the primary criteria for scrip selection.

The scrip should have been traded on each and every trading day for the last one year. Exceptions can be made for extreme reasons like scrip suspension etc.

The scrip should be among the top companies listed by average number of trades per day for the last one year. Value of Shares Traded: The scrip should be among the top companies listed by average value of shares traded per day for the last one year. Whenever the composition of the index is changed, the continuity of historical series of index values is re-established by correlating the value of the revised index to the old index index before revision. The back calculation over the last one-year period is carried out and correlation of the revised index to the old index should not be less than 0.

This ensures that the historical continuity of the index is maintained. Scrip selection would take into account a balanced representation of the listed companies in the universe of BSE. The index companies should be leaders in their industry group.

The scrip should have a listing history of at least one year on BSE. In the opinion of the Index Committee, the company should have an acceptable track record. Beta measures the sensitivity are debentures traded in the stock market a scrip movement relative to movement in the benchmark index i. Statistically Beta is defined as: Covariance and variance are calculated from the Daily Returns data of the SENSEX and SENSEX scrips. SENSEX is calculated using a "Market Capitalization-Weighted" methodology.

As per this forex trading investment company, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. An index of a set of a combined variables such as price and number of shares is commonly referred as a 'Composite Index' by statisticians.

A single indexed number is used to represent the results of this calculation in order to make the value easier to work with and track which was a cause of the stock market crash in 1929 yahoo time.

It is much easier to graph a chart based on indexed values than one based on actual values. The base period of SENSEX is The actual total market value of the stocks in the Index during the base period has been set equal to an indexed value of The formula used to calculate the Index currency converter thai baht usd fairly straightforward.

However, the calculation of the adjustments to the Index commonly called Index maintenance is more complex. The calculation of SENSEX involves dividing the total market capitalization of 30 companies in the Index by a number called the Index Divisor.

The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index maintenance adjustments. During market hours, prices of the index scrips, at which latest trades are executed, stock options strategies examples nse used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.

The closing SENSEX is computed taking the weighted average of all the trades on SENSEX constituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded in the last 15 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day's uk stock brokerage firms price is taken for computation of Index closure.

The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value. One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that additional issue of capital and other corporate announcements like bonus are debentures traded in the stock market. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values.

The Index Cell of the Exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee.

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The Index Cell takes special care to ensure that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate balance between high turnover in Index scrips and its representative character. The Index Committee of the Exchange has experts from different field of finance related to the capital markets. They include Academicians, Fund-managers from leading Mutual Funds, Finance - Journalists, Market Participants, Independent Governing Board members, and Exchange administration.

The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares.

If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value. The Index Cell of the Exchange periodically adjusts the base value to take care of such corporate announcements. Adjustments for Rights Issues: When a company, included in the compilation of the index, issues right shares, the market capitalisation of that company is increased by the number of additional shares issued based on the theoretical ex-right price.

An offsetting or proportionate adjustment is then made to the Base Market Capitalisation see ' Base Market Capitalisation Adjustment' below. Adjustments for Bonus Issue: When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change.

Therefore, there is no change in the Base Market Capitalisation, only the 'number of shares' in the formula is updated. Base Market Capitalisation Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. Base Market Capitalisation Adjustment: The formula for adjusting the Base Market Capitalisation is as follows: The existing Base Market Capitalisation Old Base Market Capitalisationsay, is Rs.

The "New Base Market Capitalisation " will then be: During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.

Any action you choose to take in the markets is totally your own responsibility. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein.

The writers may or may not be trading in the securities mentioned. Enriching Investors Since Profitable Trading Solutions for the Intelligent Investor.

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