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What is BSE Sensex? Sensex vs. Nifty in 2021

Updated: a day ago

Every investor starts their journey with two things – 1) Looking at the BSE Sensex India Live chart, and 2) Buying and trying to read the famous ‘The Intelligent Investor’ book.


The Intelligent Investor’ book has pretty tough content to digest, but Sensex is easy to understand.


Most investors keep an eye on BSE Sensex-30 stocks to look for better investment opportunities.


Refer BSE Sensex India Live chart here.





What is Sensex?


Sensex is one of the popular indices in India. The short form of the Sensitivity Index from the Bombay Stock Exchange (BSE) is the oldest exchange in Asia (established in 1875).


Sensex comprises 30 prominent stocks from BSE. It was coined by market analyst Mr. Deepak Mohani to gauge the performance of the Indian Market.


Sensex precisely reflects the Indian stock market conditions.


If Sensex is increasing, there is a general increase in the prices of most of the shares. Whereas, if the Sensex is decreasing, it means there is a general decrease in the price of most of the shares.


Sensex 30 Companies Weightage

Image – Sensex 30 Companies Weightage (as of 15th March 2021)
Image – Sensex 30 Companies Weightage Chart (as of 12th March 2021)

History of Sensex


Till Jan 1986, the BSE India stock exchange did not have any official index. Hence, there was no parameter to measure the performance of the Indian Markets.


Hence Sensex was formed by 30 prominent companies. As of date, 15th March 2021, Sensex is trading at 50834.


Image – Sensex History Chart (1998-2021)


How is Sensex calculated?


Sensex is calculated using the free-float market capitalization of individual stocks.


What is the base year of Sensex?


We must include one crucial piece of information: the Base Year for Sensex calculation is 1978-79.


In the year 1978-79, Sensex was assumed to be 100.


It means from the year 1979 till 2021, Sensex has appreciated from 100 to 51,000 points (at the rate of 16% p.a. in 42 years).


Sensex-30 Calculation


The base year to calculate Sensex is 1978-79.


According to BSE Rs. 2501.24 crore is to be used as the base market capitalization.


The base index value is 100.


Therefore,


Sensex= free float market capitalization of 30 selected companies /25041.24 crores* 100


(The free-float market capitalization of 30 selected companies is added and divided by 2501.24 crores and multiplied by 100.)


Which companies are selected for Sensex?


Any company listed in the Bombay Stock Exchange (BSE) is eligible to include in Sensex.


As of now, more than 5,000+ companies are listed in BSE.

BSE follows different screening criteria to shortlist stocks for Sensex.

All 5,000+ companies of BSE are categorized into 4 groups. The groups are:

  • A Group,

  • B Group,

  • T Group &

  • Z Group.


All the Z group companies are excluded as they have not complied with BSE regulations.


Besides, BSE looks for a minimum of 3 months of trading activity in the stock. Hence IPOs and operator stocks are taken out of the calculation.


BSE uses Free float, full market cap, trading volume, and weight criteria to shortlist the stocks for Sensex-30.


Sensex vs. Nifty


Sensex consists of top-30 companies from the BSE, whereas, Nifty is made up of top-50 companies from the NSE.


Image – Sensex vs. Nifty

Sensex is owned by the Bombay Stock Exchange (BSE). In contrast, NSE Indices Limited (formerly known as IISL) owns Nifty.


Sensex's base number is 100, and Nifty’s base number is 1000.


The base period for Sensex is 1978-79. In comparison, the base period for Nifty is 1995.


Sensex is made up of stocks from 13 sectors. However, Nifty is made up of stocks from 24 sectors. Hence, Nifty has broader market coverage.


Are you interested to know a simple yet effective technique to pick multi-baggers in Stock Market Investing?


If your answer is ‘Yes’ – Then read this post “How to Pick Multi-baggers in Stock Market Investing Even If You Are a Beginner!


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The current world changed a lot.


With a bank deposit, investing in gold, you can't beat the inflation.


Real Estate demands more money and risky as well.


So, what's the remaining option?


The answer is, "STOCK MARKET!"


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© 2020 by Indrazith Shantharaj.