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What is Sensex?

What is Sensex?

  • Calender03 Feb 2026
  • user By: BlinkX Research Team
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    • The Sensex, also known as the BSE '30', refers to the stock market index for the Bombay Stock Exchange, which is the oldest in India. It started working as early as 1875. It mirrors the changes in the performance of 30 large-sized companies belonging to various sectors from nearly 6,000 companies listed on the BSE. It is the most popular index for Indian stock market time series analysis and is also traded on many international platforms like EUREX and in BRICS countries like Brazil, Russia, China, and South Africa. Read on to learn more about what is sensex in the share market, steps involved in calculating it, why Sensex is advantageous for investors, and the process of investing in it. 

    How is Sensex Calculated? 

    Sensex meaning is simple it is a measurement of the performance of the 30 most actively traded and largest companies on the Bombay Stock Exchange (BSE). The Sensex is calculated by the free-float market capitalisation method, which takes into account the value of only shares that can be readily traded by the public. 

    The formula to calculate sensex is,  

    Sensex = (Free-Float Market Capitalisation of 30 Companies ÷ Base Market Capitalisation) × Base Index 

    Here is an example for better understanding,  

    Let's say that the Sensex has three stocks with the following weights: 

    Stock A: 25% 

    Stock B: 25% 

    Stock C: 50% 

    If the closing prices are: 

    Stock A: ₹100 

    Stock B: ₹200 

    Stock C: ₹300 

    Free-Float Market Capitalisation Calculation: 

    (25 × 100) + (25 × 200) + (50 × 300) 

    = 2,500 + 5,000 + 15,000 

    = 22,500 

    Sensex Value: 

    Sensex = (22,500 ÷ 2,504.24) × 100 = 898.8 

    After understanding how is Sensex calculated, investor need to understand how to invest in Sensex.  

    How to Invest in Sensex? 

    There are different ways to invest in Sensex. Below are the key ways through which investors can invest in the Sensex.  

    Direct investment: Direct investment means investment in shares of individual companies constituting the Sensex. It is made possible through a trading account opened with a good broker. 

    Exchange-Traded Funds: These investment funds track the returns of the Sensex. In other words, when you invest in an ETF, indirectly you are investing in all companies constituting the Sensex. The object of an ETF is to replicate the return of an index. They enable one to invest in a portfolio of stocks through a single purchase. 

    Index Funds: This is similar to ETFs, but with the only difference that they are mutual funds that follow the Sensex. This fund is invested in the same stocks as the Sensex, in a proportion exactly similar to it, to mimic its performance. 

    Advantages & Disadvantages of Sensex 

    The table below shows the advantages and disadvantages of Sensex. 

    Advantages of Sensex 

    Disadvantages of Sensex 

    • Represents the performance of 30 large, well-established, and highly liquid companies listed on the BSE. 
    • Includes only 30 stocks, which may not fully reflect the broader Indian equity market. 
    • Calculated using the free-float market capitalisation method, ensuring realistic weighting based on tradable shares. 
    • The calculation of Sensex is influenced by large-cap stocks, leading to concentration risk. 
    • It is a commonly used tool for the measurement of the performance of equity mutual funds and portfolios. 
    • Investors can’t directly invest in sensex; it can be exposed only by index funds or ETFs. 
    • Provides a rapid measure of the general market sentiment and the economy. 
    • Short-term movements might not necessarily indicate long-term economic fundamentals. 
    • Managed by the BSE with transparent methodology and regular index reviews. 
    • Lack of sector diversification relative to the wider market indices. 
    • Simple to follow the market trends by retail investors. 
    • Changes in index constituents can affect consistency over time. 

     

    Milestones of Sensex India 

    Having understood sensex meaning, let’s look at how it has performed over the years. The table below illustrates the gradual rise (and fall) of Sensex throughout India’s stock market history. 

    Timeline  Events  

    Early 90s to the end of the 20th century. 

    • Since its inception, the Sensex first crossed 1000 points on July 25, 1990, and closed at 1001 points. 
    • In 1991, the new economic reforms kicked in which enabled the Sensex to cross the 2000-point mark for the first time in 1992.  
    • Later that year, it again took a severe beating due to heavy selling after the Harshad Mehta scam.  
    • By 1999, the index crossed the 5000-point mark in preparation for the new century. 

    Beginning of the 21st Century to mid-2000s. 

    • The Sensex saw a new boom at the beginning of the 21st century, an IT-driven market boom, which saw the index breach 6006 points.  
    • This record held for four years, till January 2, 2004, when it crossed 6026.59 points. In the year 2005, the Sensex crossed 7000 points for the first time following an amicable settlement in the Ambani family feud which saw huge gains by the Reliance Group of companies.  
    • The index then raced from June to December 2005, breaching 9000 points on the back of heavy buying by foreign institutional investors and different domestic funds. 

    Mid-2000s to its end. 

    • The benchmark Sensex touched an all-time high of 10,003 points briefly during the morning session on February 7, 2006. 
    • The Sensex significantly grew between 2006 and 2007 owing to heavy buying by funds, touching 20,000 points in December 2007 from 10,000.  
    • The market witnessed highs and lows from 2008 to 2010, following which the aftermath of the stock market crash showed a gradual recovery. Sensex closed 21,004.96 points on November 5, 2010, after crossing 21,000. 

    2013-2015 

    • In October 2013, the Sensex crossed yet another new peak and closed at 21,033.97 points. 
    • By 2014, the Sensex moved past the Hang Seng Index and became Asia's highest-valued stock market index. It also saw an incredible 7,000-point surge in one year alone from 21,000 points to 28,000 points, going way ahead of the previous record of a leap of 600 points recorded in 2007. 
    • Starting on 23 January 2015, the Sensex reached a new high with 29,278 points. Within two months, after the repo rate cuts by RBI, the index crossed 30,000 points for the first time ever. 

    2017-2019 

    • During the year 2017-18, the Sensex steadily grew and breached the 38,000-point mark.  
    • It breached the 40,000-mark level for the first time on May 23, 2019. 

     

    Conclusion 

    The Sensex, one of the two major indices of the Bombay Stock Exchange (BSE), was introduced in 1986. The BSE itself was established in 1875. This represents the performance of 30 leading Indian companies and reflects the health of the stock market. It has grown from 1,000 points in 1990 to over 40,000 by 2019. Its calculation is based on free-float market capitalisation. Thus, Sensex offers a wide array of investment avenues: direct investments, ETFs, and index funds.If investors are into tracking such investments, they can try an investment stock market app for constant updates on how Sensex is performing. 

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