For the premier 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 , Mumbai by paying
a princely amount of Re 1.
no scale to measure the ups and downs in . The Stock Exchange, Mumbai
in 1986 came out with a
market. that subsequently became the barometer of the Indian stock
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. (See below: Explanation with an example)
Due to is wide acceptance amongst the Indian investors; Sensex is regarded to be the pulse of the
. 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
early nineties the witnessed heightened activity in terms of various bull and bear runs.
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 base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated
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 to calculate Sensex every 15 seconds and
for the banking sector stocks. Sensex becomes the third index in India to be
based on the globally accepted Free-float Methodology.
only 800 shares are available for trading to public. These 800 shares are the so-called
Now suppose the current A is Rs 120. Thus, the 'total' market capitalization
of company B will thus be Rs 400,000 (2,000 x 200), but its free-float market cap is only Rs 200,000
not A and B, but that does not matter), then we assume that an index market cap of
60,000 is equal to an index-value of 100.