If are already trading in the stock market then you would know about Sensex, however, even if you do not have any knowledge about Sensex then we are here to help you to gain an understanding of this concept. Sense can be called the pulse of the stock market because the expert investors take their investment decisions based on the Sensex index. It can also be called a review methodology that is accepted at the global level. The extended form of Sensex is a sensitive index. It is an index that contains approximately 30 companies that have a well-developed base and all are financially strong and settled companies. All these companies are listed on BSE I.e. Bombay stock exchange.
All the movements in the stock markets are reflected through indexes and Sensex is one of those indexes. If this index will take an uptrend that means the stocks that are contained in this index will also go up. And if this index takes the downtrend then the 30 stocks as stated above will also take a downturn. Being one of the oldest indexes, it is said to reflex the economy of India. Overall growth and development of the industry, and the trend being followed by the stock market can be assessed through this index.
How can Sensex be calculated?
There is one method called the free-float market capitalization method that is used to calculate BSE Sensex. In other words, it can also be said that this method is also being used to calculate the 30 stocks that have been stated above.
The formula of this method is the multiplication product of market capitalization and the free-float factor.
- The free-float factor is nothing but represents the percentages of the total shares of a company that the company has or is about to issue for trading by the common public. In simple words, it can also be represented through the term “the total outstanding shares” of the company. However, as stated above it includes the shares that are available to the common public to trade which means the stocks that have been issued to promoters or other institutional investors won’t be included in this term. In simplest words, the shares that are not available on stock platforms are not included in this term. The market value of the company is represented through the term “market capitalization”.
Market capitalization is the product of price per share and the number of shares issued by the company.
How can you trade on BSE Sensex?
If you want to trade on the stock market platforms then there is one basic need that you will be required to fulfill. That need is to have a Demat account. A Demat account is nothing but a way to hold stocks in the dematerialized form. All the transactions that you will be making in stocks will be represented in your Demat account. You can follow the Sensex movements and make decisions to buy or sell shares. To follow Sensex movements or news, 5paisa is one of the best platforms.