BSE Sensex

S&P BSE Sensex 

S&P BSE Sensex means a group of the 50 best stocks listed on the Bombay Stock Exchange (BSE) is the benchmark index for the BSE. It was launched on the BSE on January 1, 1986. It is a basket of thirty stocks representing the largest companies in the country. It includes the top 50 most liquid stocks in the S&P BSE LargeMidCap by float-adjusted market capitalization. As per BSE, it is India's oldest index and provides data on its website from 1979.

How is BSE SENSEX 50 Calculated?

Now that you know the S&P BSE Sensex meaning, let's see how it is calculated. The index price calculation involves the "Free-float Market Capitalisation" method. It states that the level of the index at any given point in time represents the free-float market value of the 30 stocks that make up the index compared to a base period. By dividing the share price by the total number of shares issued by the corporation, one may determine the market capitalisation of companies. Multiplying this value by the free-float factor gives the free-float market capitalisation 

The formula is: 

BSE SENSEX 50 = Total Free-Float Market Capitalisation x Base Index Value / Base Market Capitalisation

Stock Selection Criteria for S&P BSE Sensex

The S&P BSE Index Committee chooses its members based on a number of factors: 

• The BSE in India must list the stock on its exchange.
• The stocks must be large to mega-cap businesses.
• They should have reasonable liquidity.
• A company’s core business operations should generate sufficient revenue.
• The stocks must maintain the sector's balance.
• The stock must be listed for at least six months at BSE. 
• A stock must have been traded every day in the 6-month reference period.
• The stocks must have a derivative contract available for trading.

S&P BSE Sensex Stock Selection Process

The following procedure is followed to include stocks in the S&P BSE Sensex.

• Stocks that fulfil the qualifying requirements are ranked based on average six-month float-adjusted market capitalisation to identify the top 75 ones. 
• The firms that satisfy the eligibility criteria are once more ranked according to their average total market capitalisation over the last six months. Again, the top 75 are identified. 
• Next, the companies are combined and arranged according to their annualised traded value. Annualised traded value is calculated by taking the median of the monthly medians of the daily traded values over the 6-month duration. 250 trading days in a year are considered to calculate annualisation.
• The stocks with a total annualised trading value of more than 98% are not included.
• The remaining companies are then arranged according to their average six-month float-adjusted market capitalisation for the previous six months. Companies with a weight of less than 0.5% are not included.
• The remaining stocks are then ranked according to their average float-adjusted market capitalisation for six months. They are chosen for index inclusion in line with the following rules.

1. The top 21 stocks are included in the index based on their ranking, regardless of their existing index component status.
2. Until 30 stocks are selected, the existing ones ranked 22 to 39 are chosen in the order of highest rank.
3. At times, after the above step, 30 suitable stocks are not available. So, the non-constituents ranked 22–30 are chosen. In the index, companies with underrepresented India Industry Classification Structure macro-economic indicators in comparison to the same macro-economic indicator in the BSE AllCap get preference.
4. Non-constituents are chosen in order of highest rank, in case the target constituent count is still not reached.