Have you ever wondered why news channels talk about Sensex going up or down? If you're curious about the stock market but find it confusing, don’t worry! In this article, we will explore what Sensex is, its full form, and why it is important—all in simple words that are easy to understand.
What is the Full Form of Sensex?
The full form of Sensex is "Stock Exchange Sensitive Index." It is the benchmark index of the Bombay Stock Exchange (BSE) in India. This means that it represents the performance of 30 of the biggest and most important companies listed on the BSE.
Why is Sensex Important?
Sensex is one of the most important indicators of the Indian economy. Here’s why it matters:
✅ Shows Market Performance – It tells whether the stock market is performing well or not.
✅ Affects Investments – Investors use it to decide when to buy or sell stocks.
✅ Reflects Economic Growth – A rising Sensex means businesses are growing and making profits.
✅ Helps Policymakers – The government and financial experts use Sensex data to make important economic decisions.
Historical Context of Sensex
Sensex has witnessed several major financial milestones:
1979 – The Sensex was first introduced with a base value of 100 points.
1991 Economic Liberalization – After India opened its economy, foreign investments surged, and Sensex began its rapid rise.
1992 Harshad Mehta Scam – A major stock market fraud caused the Sensex to crash, highlighting the need for better regulations.
2008 Global Financial Crisis – Sensex fell sharply but recovered over time.
2020 COVID-19 Pandemic – The market saw a drastic drop but later hit record highs.
2023 and Beyond – Sensex has crossed 60,000 points, reflecting India's strong economic growth.
How is Sensex Calculated?
The Sensex is calculated using the Free-Float Market Capitalization Method. This sounds technical, but let's simplify it:
🔹 Market Capitalization – The total value of a company’s shares.
🔹 Free-Float Factor – Only includes shares that people can buy and sell in the stock market.
🔹 Index Value – The combined value of all 30 companies is used to calculate the Sensex score.
Example Calculation: Imagine two companies:
Company A has a market cap of ₹10,000 Cr and a free-float factor of 80%.
Company B has a market cap of ₹5,000 Cr and a free-float factor of 60%.
Formula:
Sensex = (Market Cap × Free-Float Factor) / Base ValueSo,
Sensex Value = [(10,000 × 0.8) + (5,000 × 0.6)] / Base ValueThis means only the freely traded portion of each company is used to determine the Sensex level.
Which Companies are in Sensex?
The 30 companies included in the Sensex belong to different industries like banking, technology, and healthcare such as :-
- Lupin
- Tata Steel Limited
- Wipro Limited
- Tata Motors Limited
- State Bank of India
- Sun Pharmaceutical Industry Limited
- Tata Motors- DVR Ordinary
- Tata Consultancy Services Limited
- Kotak Mahindra Bank Limited
- Mahindra and Mahindra Limited
- Maruti Suzuki India Limited
- Larsen and Toubro Limited
- Reliance Industries Limited
- NTPC Limited
- Power Grid Corporation of India Limited
- Oil and Natural Gas Corporation Limited
- Viola
- ITC Limited
- Infosys Limited
- ICICI Bank Limited
- HDFC Bank Limited
- Hindustan Unilever Limited
- Hero MotorCorp Limited
- Housing Development Finance Corporation Limited
- Asian Paints Limited
- Bajaj Auto Limited
- Axis Bank Limited
- Bharti Airtel Limited
- Adani Ports and Special Economic Zone Limited
- Coal India Limited
- Reddys Laboratories Limited.
How Does Sensex Affect Our Daily Lives?
Even if you don’t invest in stocks, the Sensex still affects your life! Here’s how:
💰 Job Market – When Sensex is high, companies grow and hire more people.
📈 Prices of Goods – A falling Sensex may indicate an economic slowdown, affecting product prices.
🏦 Bank Interest Rates – Interest rates on loans and savings accounts may change based on market trends.
Can Students Learn About the Stock Market?
Yes! Even if you are too young to invest, you can start learning about how the stock market works. Here’s how:
📚 Read Financial News – Follow business news to see how Sensex is performing.
💰 Understand Saving & Investing – Learn the basics of how money grows over time.
📝 Try Virtual Stock Trading – Use stock market simulation apps to practice trading without real money.
Financial knowledge at a young age helps in making smart money decisions in the future!
Frequently Asked Questions (FAQs)
1) How is Sensex different from mutual funds?
Sensex tracks top company performances, while mutual funds are investment portfolios managed by fund managers.
2) Does Sensex affect gold prices?
Yes, when stock markets are volatile, investors often move money to gold, affecting its price.
3) Is Sensex the same as Dow Jones? No, Dow Jones is the U.S. stock market index, while Sensex represents India's top companies.
Future of Sensex
Sensex has grown significantly over the years. It started at 100 points in 1979 and has now crossed 60,000 points! As India’s economy grows, experts predict that the Sensex will continue to rise, benefiting businesses and investors.
Understanding Sensex is not just for stock market experts—it helps everyone understand how businesses and economies grow. Whether you are a student learning about finance or someone planning to invest in the future, knowing how Sensex works is a valuable skill. Stay curious, keep learning, and take charge of your future with School Dekho!
.webp){kind=small}
.webp){kind=small}