BSE Sensitive Index or Sensex

What is BSE Sensitive Index or Sensex?

BSE Sensitive Index or Sensex is an abbreviation of the Bombay Stock Exchange Sensitive Index. It happens to be the benchmark index of the Bombay Stock Exchange located in Mumbai, India.

Sensex comprises of 30 of the largest as well as most actively traded stocks on the BSE. Compiled first almost three decades back in 1986, the Sensex is renowned as India’s oldest stock index.

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The index is evaluated on the basis of a free float capitalization model while weighing the effect of a particular company on the index. This, in essence, can be seen as a variation of the market cap method. However, rather than using the company’s outstanding shares, the method utilizes the float, or shares available for real time trading.

Hence, the free float methodology does not include the use of any restricted stock, for example – those in possession of the company insider (and thus not available for easy purchase).

In order to find out the free float capitalization of a company, you must first find its market cap – which is actually fancy term for the number of Outstanding Shares x Share Price), and then multiply its free float factor.

The free float factor, in turn, can be determined using the percentage of floated shares to outstanding.

 

Edited and Updated 18th January 2014

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