Have you ever had a friend mention SENSEX and thought to yourself, “What is this mysterious stock market index anyway”
India’s Bombay Stock Exchange (BSE) is one of the oldest and richest stock exchanges in the world. It holds a special place in Indian history as it was set up in 1875, making it even older than the Dow Jones Industrial Average. As of posting this article, the BSE market cap stands at Rs 188 lakh crore (US$2.4 trillion), second only to the United States’ Nasdaq Composite Index with US$3.8 trillion.
The BSE has many indices that track performance but arguably none more important than SENSEX (the BSE Sensitive Index). In this article, I’ll explain what SENSEX really means and why investors should care about it.
Overview of the BSE SENSEX
If you’re just starting out in the stock market, the BSE SENSEX the Bombay Stock Exchange Sensitive Index is an important concept to know. It’s considered India’s most widely tracked and followed stock index, giving investors a snapshot of the Indian markets.
The BSE SENSEX is calculated using a market capitalization-weighted methodology, which means that stocks are weighted according to their market capitalizations rather than their trading prices. This method helps to provide a better reflection of overall market conditions, as it can measure how much total value the company has rather than its share price in isolation.
In addition to measuring India 30 largest and most liquid stocks, the BSE SENSEX also takes into account factors such dividend yield and price/earnings ratio when calculating the index value. This helps give investors an overall view of how India financial markets are performing as well as providing insights into individual companies.
What Companies Are Included in the SENSEX?
It tracks the performance of these 30 companies across sectors, and provides investors with a single measure of how the Indian stock market is performing.
But which companies are included in the SENSEX? The BSE includes 10 industry groups as part of the SENSEX:
- Banking
- Capital Goods
- Consumer Durables
- Automobiles
- Technology
- Fast Moving Consumer Goods (FMCG)
- Power
- Fertilizers & Pesticides
- Oil & Gas
- Health Care
The 30 stocks that make up the BSE SENSEX represent 12 different economic sectors and are selected by evaluating their liquidity in terms of market capitalization, and trading frequency. Some of the notable companies included are Reliance Industries Limited, HDFC Bank Limited, ITC Limited and Tata Consultancy Services.
Benefits of Trading With the SENSEX
When you trade with the SENSEX, you’re getting access to a lot of great benefits. After all, the Bombay Stock Exchange is a leading global exchange, and their SENSEX index is one of the oldest share indices in India.
Accessible and Profitable
The SENSEX has been designed to be accessible by all types of investors, including retail and institutional investors. Over the past few decades it has become one of the most profitable stock indices in India with an average yearly return of upwards of 10%.
Liquidity & Low Fees
The SENSEX offers investors high liquidity with over 300 stocks traded on it daily. Fees for trading on the BSE are also significantly lower than other exchanges, so investors only pay what they need to for trades.
Reliable History
The SENSEX has a trustable history; it has been around since 1986 and is well-known in India as one of its leading stock indices. As such, it’s a smart choice for investors who are looking to make reliable investments over time.
Overall, trading with the SENSEX provides an easy way for investors to access an array of benefits. That will help them maximize their profits from their investments in Indian stocks.
Important Considerations When Trading With the SENSEX
When trading with the SENSEX, there are a few important considerations you should keep in mind.
First, recognize that the SENSEX is a market-weighted index and that its value only reflects the performance of the 30 components within it. As a result, the index can experience sharp drops or rises in short periods of time. Therefore, it’s important to diversify your investments to reduce risk.
Second, since SENSEX is made up of large and established companies with proven track records. There isn’t much potential for high returns. That said, despite its low volatility, SENSEX can still be a valuable part of your portfolio for added stability and consistent returns over time.
Third, pay attention to the trends in India economy as well as global macroeconomic events. As they can influence the performance of companies listed on BSE. This will help you make more informed decisions when trading with SENSEX.
Finally, Dona forget to use fundamental analysis and technical indicators when making trading decisions. They can guide you towards making prudent trades that reduce your overall risk exposure.
Conclusion
The BSE SENSEX is a great way to get started in the stock market and make strategic investments. With 30 well-established and financially sound companies listed on the Bombay Stock Exchange. Its a great way to get exposure to the Indian stock market. Its important to keep in mind that it is always subject to change. So its important to monitor trends and understand how the index is composed. With knowledge of the index, investors can make better decisions about their investments and be better prepared for market fluctuations. With its low entry cost and free-float market weightage. The SENSEX is an attractive way to start investing in the Indian stock market.
