Sensex
The Sensex is the main stock index of BSE, tracking 30 large and actively traded Indian companies weighted by their free-float market capitalisation.
What it is
The Sensex, short for sensitive index, is one of India’s oldest and best-known stock market indicators. It follows 30 well-established companies listed on BSE, chosen to represent major sectors of the economy.
Like any index, it turns the movement of many shares into one number. When news reports say “the Sensex fell 500 points”, they are describing the combined move of those 30 companies.
How it is calculated
The Sensex is free-float market-cap weighted. Only shares available for public trading are counted, and larger companies have a bigger say in the index’s movement.
Its member companies are reviewed periodically. A company can be replaced if it no longer meets the size, trading or other criteria.
Points vs percentage
News often quotes the Sensex in points. Points are less meaningful than percentages, because the same points move is a smaller percentage when the index is higher. Always convert to a percentage to judge how big a move really was.
The Sensex and the NIFTY 50 overlap heavily in the companies they hold, so they usually move in a similar direction by a similar percentage. Neither tells you what mid and small companies are doing.
Points vs percentage
Suppose an index is at 40,000 and falls 800 points. That is a 2% fall. If the same index were at 80,000, an 800-point fall would be only 1%. The headline number of points looks the same, but the second move is half as big.
Common mistakes
- Judging market moves by points instead of percentages.
- Assuming your portfolio should move like the Sensex when it holds very different companies.
- Thinking the Sensex and NIFTY measure completely different things.
How many companies does the Sensex track?
- 30 large companies on BSE
- 50 large companies on NSE
- Every company listed in India
Show the answer
30 large companies on BSE. The Sensex tracks 30 large companies listed on BSE. The NIFTY 50 is the NSE index of 50 companies.
Common questions
What is Sensex in simple words?
It is a number that shows how 30 large companies listed on BSE are doing together, weighted by their size.
Which is better, Sensex or NIFTY?
Neither is better. They are two benchmarks of large Indian companies built on similar rules, and they usually move together.
Why does the Sensex go up and down?
It moves when the prices of its 30 companies move, mainly the largest ones. Those prices respond to company results, the economy, interest rates and global events.
Practise the market, free
Short chapters, then real calls graded on your reasoning, not luck. No money involved.