What is Sensex?
Do you know what Sensex is (What is Sensex in English)?
You may have often heard or seen the word Sensex on TV or in newspapers. Sometimes it is said that “Sensex went up by some points today”, and sometimes it is said that “Sensex dropped by some points”.
Whenever you think about investing in the stock market, you must have heard the word Sensex. But many people don’t understand what it really means. That’s why in this post, we will explain what Sensex is and how it works in a simple way.
In our previous post, we explained what Nifty is. Today we will talk about Sensex. Sensex is similar to Nifty, but the main difference is that Sensex includes only 30 companies, while Nifty includes 50 companies, which is why it is called Nifty 50. Now let’s understand more about what Sensex is.
What is Sensex (Sensex in English)
The term Sensex was first used by Deepak Mohini. It is a combination of two words – Sensitive and Index. This means that Sensex is a sensitive index that shows how the stock market is performing.
Sensex is the main index of the Indian stock market. It shows whether the prices of shares in the Bombay Stock Exchange (BSE) are going up or down. It tells us how well the top 30 big companies in the BSE are performing.
When we talk about Sensex, it is the oldest stock market index in India, which started in 1986.
Sensex is used to track the share prices of companies listed in the stock market. Its main job is to monitor the prices of all shares and then give an average value at the end of the day. This helps us understand whether the share prices have gone up or down.
Bombay Stock Exchange (BSE) is the oldest stock exchange in India. It includes 30 big Indian companies. These companies are very large in terms of market value, and their value is equal to about 37% of India’s total GDP.
These companies help set the direction of the Indian stock market. In simple terms, Sensex is an index created to track the share prices of these large companies. It shows whether their share prices are going up or down.
How is Sensex formed?
Now that we know what Sensex is, let’s understand how it is made and who makes it. We’ll look at the process behind forming the Sensex.
As we know, Sensex is a part of the Bombay Stock Exchange (BSE). Sensex is made using the share prices of only 30 selected companies, even though more than 6000 companies are listed on the BSE.
Only the top 30 companies are included in Sensex because:
These companies’ shares are bought and sold the most in the market.
These are very big companies, and their total value (market cap) is almost half of the total stock market, which is a big deal.
These 30 companies are chosen from 13 different sectors, and each of them is the biggest in its field.
These companies are selected by the Index Committee of the stock exchange. The committee includes experts from government, banks, and famous economists.
If you want to start investing in the stock market, you can open your account with a discount broker like Zerodha. You can open a Demat account quickly and easily, and then start buying shares. The link is given below.
How does Sensex go up or down?
Sensex tells us what is happening with company shares. It tracks the price changes of the 30 companies included in it.
If the share prices of these companies go up, then Sensex also goes up.
If the share prices go down, then Sensex also falls.
In short, when the value of the top 30 companies increases, Sensex rises. When their value drops, Sensex falls.
The main reason why share prices go up or down is how well a company is doing.
For example, if a company starts a new and big project, people think it will do well, so more people want to buy its shares. This makes the share price go up.
But if the company is facing problems, people try to sell their shares. When many people sell at once, the share price goes down, and because of this, Sensex also falls.
How are the 30 companies chosen for Sensex?
The Index Committee selects companies for Sensex based on the following rules:
The company’s shares must be listed on the stock exchange for at least 1 year.
The company’s shares must be actively traded (bought and sold) on all working days in the past year.
Based on the average number of trades and trade value, the company must be among the top 150 companies in India.
These are the main points the committee looks at when picking companies.
Which are the top 30 companies in Sensex?
The 30 companies in Sensex were first chosen in 1986. These companies are financially strong and have a large market value. Their shares are always in demand in the stock market.
The list shows the top 30 companies that are part of the Sensex (Stock Market Index). These companies are leaders in their industries and help represent the performance of the Indian economy. Each row in the table gives details like:
- Company Name (e.g., Asian Paints, HDFC Bank)
- Industry it belongs to (e.g., Banking, Software, FMCG)
- Current Share Price
- Market Capitalization (total value of the company’s shares)
- Change in price today
- Earnings and Profit Ratios
- These companies were chosen because:
- They are very large and well-known.
- Their shares are actively bought and sold.
They represent important sectors of the Indian economy.
Blue Chip Companies and Sensex
Companies that are strong, stable, and leaders in their fields are called “Blue Chip” companies. Right now, there are 31 such companies listed in the BSE Sensex (Bombay Stock Exchange Index). These companies are top players in their respective sectors and represent the Indian economy in the Sensex.
Benefits of Sensex
The main benefit of the Sensex is that it helps investors understand how the stock market might move in the future. This helps them decide when and where to invest their money.
Apart from this, the Sensex also gives us indirect benefits that are useful in other ways. For example, when the Indian rupee becomes stronger, things become cheaper in the country. Let’s look at a few more benefits:
1.More Jobs and Growth
When the Sensex goes up, investors get confident and put more money into companies.
This helps companies grow and expand their business.
As a result, they hire more people, which helps reduce unemployment.
2.Foreign Investment and Strong Rupee
When the stock market performs well, foreign investors also become interested in investing in Indian companies.
Their investment helps make the Indian rupee stronger.
A strong rupee makes imported goods cheaper, which benefits the public.
Sensex’s Growth Over Time
The Indian stock market is growing rapidly. When the Sensex started around 1990, it was at just 1,000 points. Today, it has crossed 30,000 points and keeps reaching new highs.
We hope that in the future, the Sensex will continue to rise and help investors make good profits.
What Did You Learn Today?
If you don’t understand how the stock market works, investing in it can be risky. So, always be careful and gather full information before putting your money into the stock market.
We hope you liked this information about the Sensex and now you have a clear idea of what Sensex is.
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