SENSEX - ECONOMY
News: Adani Ports to enter Sensex:
How India’s major stock indices work
What's in the news?
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Adani Ports and Special Economic Zone Ltd (APSEZ)
is set to be included in the Sensex at the Bombay Stock Exchange, replacing
Wipro.
Sensex:
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Sensex, otherwise known as the S&P BSE Sensex
index, is the benchmark index of India’s BSE, formerly known as the Bombay Stock Exchange.
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Created in 1986, the Sensex is the oldest stock index in India.
Key Features:
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It is designed to measure the performance of the 30 largest, most liquid, and financially
sound companies across key sectors of the Indian economy that are listed at
BSE Ltd.
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The index’s composition is reviewed in June and December each year.
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Analysts and investors use it to observe the cycles
of India’s economy and the development and decline of particular industries.
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As such, even though the Sensex is composed of only
30 stocks, investors make decisions to buy or sell based on the movement of the
Sensex.
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The total
market capitalisation, or the total value of all listed shares, of
BSE-listed firms is Rs 419.99 lakh crore (May 24).
Criteria for Selection
of Companies in NSE:
To be considered for selection, a stock must satisfy certain requirements
such as
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It must have a listing
history of at least six months at BSE.
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It should have traded
on every trading day at the BSE during this six-month reference period.
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To be eligible, the stock should have a derivative contract, that is, an
agreement between two parties to buy or sell any form of security at a certain
price in the future.
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The company must be among the top 75 companies based on their average three-month float or total
market cap.
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It should have a minimum free-float market cap of 0.50% after market cap and
liquidity criteria are met.
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In terms of liquidity, the cumulative weight of the
three-month average daily value traded (ADVT) is calculated for companies that
meet the eligibility requirements.
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Any prospective constituents with a total weight of
ADVT greater than 98% are excluded from
the index.
Difference between
Sensex and Nifty:
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The difference lies in the number of stocks that each index tracks.
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While the Sensex constitutes 30 companies trading
on the BSE, the Nifty 50 is a broad-based index consisting of 50 blue chip
large and liquid stocks traded on the National Stock Exchange of India (NSE).
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The Nifty 50
was started in 1995. It includes companies such as Adani Enterprises, Bajaj
Finance, and Coal India.
Go back to basics:
Global Indices:
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Global indices, similar to the BSE Sensex, serve as
barometers for the stock market performance in different countries and regions.
Dow Jones Industrial
Average (DJIA):
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Represents 30 significant stocks traded on the New York Stock Exchange (NYSE) and the
NASDAQ.
NASDAQ Composite:
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An index of more than 2,500 stocks of both domestic
and international technology and biotech companies listed on the NASDAQ stock
market.
S&P 500:
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A market-capitalization-weighted index of 500 of
the largest publicly traded companies in the U.S.
FTSE 100:
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An index of the 100 companies listed on the London Stock Exchange with the highest
market capitalization.
Nikkei 225:
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The leading index for the Tokyo Stock Exchange, representing the top 225 blue-chip companies
in Japan.