Previous Year Question
‘SENSEX’ is the popular Index of Bombay Stock Exchange (BSE). It is measured on the basis of how many blue chip companies listed in BSE?
20
30
25
10
Correct Answer: B
Detailed Solution
The SENSEX is the major benchmark stock-market index of the Bombay Stock Exchange. Its name is derived from Sensitive Index.
According to the official BSE index information, the SENSEX is designed to measure the performance of 30 large, liquid and financially sound companies listed on BSE, representing major sectors of the Indian economy.
Thus, the SENSEX does not represent every company listed on the BSE. Instead, it uses a selected basket of 30 major companies to indicate the broader performance of the equity market.
The SENSEX is calculated using a Free-Float Market Capitalisation Methodology. Broadly, this means that instead of using the entire market capitalisation of a company, the methodology focuses on shares considered available for trading by public investors.
In simple terms—
Market Capitalisation = Share Price × Total Shares
Whereas the relevant concept for index weighting is—
Free-Float Market Capitalisation = Market Capitalisation × Free-Float Factor
The SENSEX was launched on 2 January 1986. According to BSE, it continues to comprise 30 companies.
SENSEX → BSE → 30 companies
NIFTY 50 → NSE → 50 companies