Usualla En blogla sex, violence nirainja padangaloda vimarsanam patri thaan ezhuthittu irunthaen. Oru changeku sensex naa enna how they arrive it konjam paaklamae!
For the premier Bombay Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called The Stock Exchange, Mumbai by paying a princely amount of Re 1.
Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.
Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies.
The base year of Sensex is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.
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, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.
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 1979 onwards). Small wonder, the Sensex has over the years become one of the most prominent brands in the country.
The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The Sensex captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through Sensex.
Sensex Calculation Methodology
Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this 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 further multiplied by the free-float factor to determine the free-float market capitalization.
The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the Free-float 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 adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate Sensex every 15 seconds and disseminated in real time.
Dollex-30
BSE also calculates a dollar-linked version of Sensex and historical values of this index are available since its inception.
Understanding Free-float Methodology
Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market.
It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.
In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark, Bankex is positioned as a benchmark for the banking sector stocks. Sensex becomes the third index in India to be based on the globally accepted Free-float Methodology.
The 30 Sensex stocks are:
ACC, Ambuja Cements, Bajaj Auto BHEL, Bharti Airtel Cipla, DLF, Grasim Industries HDFC HDFC Bank, Hindalco Industries Hindustan Lever ICICI Bank Infosys ITC, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog NTPC, ONGC Ranbaxy Laboratories Reliance Communications Reliance Energy Reliance Industries Satyam Computer Services State Bank of India Tata Consultancy Services Tata Motors Tata Steel and Wipro.
Simple Calculation with Examples:
sensex and nifty:
of all the stocks that are on bse, 30 "top" stocks are chosen from different industries by a panel. these stocks are usually the market leaders from their respective industries. for example, icici bank, state bank of india and hdfc bank from banking sector, infosys, tcs, etc from information technology and so on ...each of these stocks have different weights to
it, adding up to 100.
OK lets make it simple. say there are only 3 stocks in the index and i will call it index. in this index i have 3 companies, viz. vivek infrastructure ltd (VIL), vivek power ltd (VPL) and vivek airlines ltd (VAL)
(phew ... iam already day dreaming).
assume, VIL is at rs 200 today and has 30% weightage,
VPL is 1000 with 40% weightage and
VAL is 150 with 30% weightage.
so how do we make index ?
simple we multiply the price with the weightage,
i.e. 200 * 30% + 1000 * 40% + 150 * 30% = 505 !
so now if tomorrow the prices rise and VIL is 220, VPL is 1010 and VAL is 130,
the index will be, 220 * 30% + 1010 * 40% + 130 * 30% = 509 !
so it means, index has gone up by 4 points :) that's it ! wasn't that tough.
back to sensex and nifty, same logic applies, same calculations apply, just that sensex has 30 stocks and nifty has 50. also sensex is bse index and nifty is nse index.
For the premier Bombay Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called The Stock Exchange, Mumbai by paying a princely amount of Re 1.
Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.
Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies.
The base year of Sensex is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.
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, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.
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 1979 onwards). Small wonder, the Sensex has over the years become one of the most prominent brands in the country.
The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The Sensex captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through Sensex.
Sensex Calculation Methodology
Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this 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 further multiplied by the free-float factor to determine the free-float market capitalization.
The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the Free-float 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 adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate Sensex every 15 seconds and disseminated in real time.
Dollex-30
BSE also calculates a dollar-linked version of Sensex and historical values of this index are available since its inception.
Understanding Free-float Methodology
Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market.
It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.
In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark, Bankex is positioned as a benchmark for the banking sector stocks. Sensex becomes the third index in India to be based on the globally accepted Free-float Methodology.
The 30 Sensex stocks are:
ACC, Ambuja Cements, Bajaj Auto BHEL, Bharti Airtel Cipla, DLF, Grasim Industries HDFC HDFC Bank, Hindalco Industries Hindustan Lever ICICI Bank Infosys ITC, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog NTPC, ONGC Ranbaxy Laboratories Reliance Communications Reliance Energy Reliance Industries Satyam Computer Services State Bank of India Tata Consultancy Services Tata Motors Tata Steel and Wipro.
Simple Calculation with Examples:
sensex and nifty:
of all the stocks that are on bse, 30 "top" stocks are chosen from different industries by a panel. these stocks are usually the market leaders from their respective industries. for example, icici bank, state bank of india and hdfc bank from banking sector, infosys, tcs, etc from information technology and so on ...each of these stocks have different weights to
it, adding up to 100.
OK lets make it simple. say there are only 3 stocks in the index and i will call it index. in this index i have 3 companies, viz. vivek infrastructure ltd (VIL), vivek power ltd (VPL) and vivek airlines ltd (VAL)
(phew ... iam already day dreaming).
assume, VIL is at rs 200 today and has 30% weightage,
VPL is 1000 with 40% weightage and
VAL is 150 with 30% weightage.
so how do we make index ?
simple we multiply the price with the weightage,
i.e. 200 * 30% + 1000 * 40% + 150 * 30% = 505 !
so now if tomorrow the prices rise and VIL is 220, VPL is 1010 and VAL is 130,
the index will be, 220 * 30% + 1010 * 40% + 130 * 30% = 509 !
so it means, index has gone up by 4 points :) that's it ! wasn't that tough.
back to sensex and nifty, same logic applies, same calculations apply, just that sensex has 30 stocks and nifty has 50. also sensex is bse index and nifty is nse index.
5 comments:
Your article gives some good information. Every one to get knowledge of any fund, before invest. Ex: What is New Fund Offer. Understanding about New Fund Offer Importance.
Good one! Thanks for sharing. By the way What's the benifit of investing in funds over the individual stocks and bonds?
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