The Bombay Stock Exchange SENSEX (portmanteau of sensitive and index) also referred to as BSE 30 is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April 2011, the market capitalisation of SENSEX was about 29,733 billion (US$565 billion) (42.34% of market capitalization of BSE), while its free-float market capitalization was 15,690 billion (US$298 billion).
Contents |
The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization method—a variation of the market capitalisation method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.[1]
Initially, the index was calculated based on the ‘full market capitalization’ method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice.
As per free float capitalization methodology, the level of index at any point of time reflects the free float 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. This market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading.
The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor.The divisor is the only link to original base period value of the SENSEX. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions, replacement of scrips, etc.
The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.[2]
Following is the list of the component companies of SENSEX as on August 8, 2011
| Code | Name | Sector | Adj. Factor | Weight in Index(%) |
|---|---|---|---|---|
| 532977 |
Automotive |
0.55 |
1.6 |
|
|
532454 |
Telecom |
0.35 |
3 |
|
|
500103 |
Capital Goods |
0.35 |
2.2 |
|
|
500087 |
Pharmaceutical |
0.6 |
1.2 |
|
|
533278 |
Power |
0.1 |
2 |
|
|
532868 |
Construction |
0.2 |
0.6 |
|
|
500010 |
Finance |
0.90 |
6.8 |
|
|
500180 |
Finance |
0.85 |
7.1 |
|
|
500182 |
Automotive |
0.50 |
1.43 |
|
|
500440 |
Aluminum |
0.6 |
1.5 |
|
|
500696 |
FMCG[3] |
0.50 |
2.8 |
|
|
532174 |
Finance |
1.00 |
8.8 |
|
|
500209 |
Information Technology |
0.85 |
9.4 |
|
|
500875 |
FMCG[3] |
0.70 |
8.3 |
|
|
532532 |
Housing Related |
0.55 |
0.5 |
|
|
532286 |
Steel |
0.55 |
1.8 |
|
|
500510 |
Engineering |
1 |
8 |
|
|
500520 |
Automotive |
0.75 |
2.3 |
|
|
532500 |
Transport Equipments |
0.50 |
1.3 |
|
|
532541 |
Power |
0.15 |
1.2 |
|
|
500312 |
Oil & Gas |
0.20 |
3.1 |
|
|
500325 |
Oil & Gas |
0.50 |
9.2 |
|
|
500112 |
Finance |
0.45 |
4.7 |
|
|
500900 |
Metal, Metal Products, and Mining |
0.45 |
1.4 |
|
|
524715 |
Healthcare |
0.40 |
1.5 |
|
|
532540 |
Information Technology |
0.3 |
3.8 |
|
|
500570 |
Transport Equipments |
0.55 |
2 |
|
|
500400 |
Power |
0.70 |
1.6 |
|
|
500470 |
Metal, Metal Products & Mining |
0.70 |
2.7 |
|
|
507685 |
Information Technology |
0.20 |
1.4 |
Some of the historical replacements were:
Here is a timeline on the rise of the SENSEX through Indian stock market history.
On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the SENSEX had caused investors to lose Rs 6 lakh crore (US$131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the SENSEX managed to move up 700 points, still 450 points in the red.
The SENSEX eventually recovered from the volatility, and on October 16, 2006, the SENSEX closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006.
On May 18, 2009, the SENSEX surged 2110.79 points from the previous closing of 12174.42 this leading to the suspension of trade for the whole day.This event created history in Dalal Street, by being the first ever time that trade had been suspended for an increase in value. This rally is primarily due to the victory of the UPA in the 15th General elections. Trading was open for that day only for 55 seconds. Initially 25 seconds and 30 seconds market reached upper freeze limit twice in that day itself.
On Monday July 23, 2007, the SENSEX touched a new height of 15,733 points. On July 27, 2007 the SENSEX witnessed a huge correction because of selling by Foreign Institutional Investors (FIIs) and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE SENSEX fell by 615 points in a single day on Wednesday August 1, 2007.
Therefore the US Subprime crisis has a great effect even on INDIA.gold cross the psychological barrier.
On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.
However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). Within a minute of opening trade, the SENSEX crashed by 1744 points or about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the meantime, that the government was not against FIIs and was not immediately banning PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last day's close.
This was, however not the end of the volatility. The next day (October 18, 2007), the SENSEX tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued the next day when the SENSEX fell 438.41 points to settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the day.
After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.
In the third week of January 2008, the SENSEX experienced huge falls along with other markets around the world. On January 21, 2008, the SENSEX saw its highest ever loss of 1,408 points at the end of the session. The SENSEX recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of a recession in the US.
The next day, the BSE SENSEX index went into a free fall. The index hit the lower circuit breaker in barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875 points.[5]
Over the course of two days, the BSE SENSEX in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening or a two day fall of 13.9%.[5]
On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the SENSEX had caused investors to lose Indian rupees 6 lakh crore ($131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the SENSEX managed to move up 700 points, still 450 points in the red.
The SENSEX eventually recovered from the volatility, and on October 16, 2006, the SENSEX closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006.
On July 23, 2007, the SENSEX touched a new high of 15,733 points. On July 27, 2007 the SENSEX witnessed a huge correction because of selling by Foreign Institutional Investors and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE SENSEX fell by 615 points in a single day on August 1, 2007.
On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it was not possible to know who owned the underlying securities,[6] and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.[7]
However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). Within a minute of opening trade, the SENSEX crashed by 1744 points or about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the meantime, that the government was not against FIIs and was not immediately banning PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last day's close.
This was, however not the end of the volatility. The next day (October 18, 2007), the SENSEX tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued the next day when the SENSEX fell 438.41 points to settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the day.
After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.
In the third week of January 2008, the SENSEX experienced huge falls along with other markets around the world. On January 21, 2008, the SENSEX saw its highest ever loss of 1,408 points at the end of the session. The SENSEX recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of a recession in the US.
The next day, the BSE SENSEX index went into a free fall. The index hit the lower circuit breaker in barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875 points.[5]
Over the course of two days, the BSE SENSEX in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening or a two day fall of 13.9%.[5]
Some major single-day falls of the SENSEX have occurred on the following dates:[8]
|
||||||||||||||