What is Sensex? History, Calculation & Significance

The History of the Sensex: From 1875 to Today

To understand the Sensex, you must first appreciate the institution behind it - the Bombay Stock Exchange. The BSE was established in 1875 as 'The Native Share and Stock Brokers Association' under a banyan tree on Dalal Street in Mumbai. It is not just Asia's oldest stock exchange; it is one of the oldest in the entire world. For over a century, it served as the primary marketplace where Indian companies raised capital and investors bought and sold shares.

For decades after independence, however, there was no single universally accepted measure of how the BSE as a whole was performing. Individual stock prices could be tracked, but a composite indicator representing the market's overall direction was absent. This gap was filled on 1 January 1986, when the BSE officially launched the Sensex with a base value of 100, pegged to the base year of 1978–79. The back-calculation of data to 1979 allowed historians and analysts to track market movements retrospectively.

The early years of the Sensex were characterised by modest trading volumes and limited retail participation. The index hovered in the hundreds for much of the 1980s. Then came 1991 - a watershed year in Indian economic history. Prime Minister P.V. Narasimha Rao and Finance Minister Dr. Manmohan Singh unveiled sweeping economic liberalisation reforms, dismantling the licence raj, opening up foreign investment, and fundamentally reshaping India's economic trajectory. The Sensex responded dramatically: it surged from around 1,000 in early 1991 to over 4,000 by 1992.

The mid-1990s brought the scam associated with a prominent stockbroker that temporarily shook investor confidence, but the Sensex recovered and resumed its upward journey. The late 1990s saw the global technology boom reach Indian shores, with software companies listing on the BSE and propelling the index northward. The Sensex crossed 5,000 in 1999 and briefly touched 6,000 before the global dotcom bust dragged it back.

The 2003–2008 bull run was perhaps the most spectacular in BSE history. Fuelled by India's high GDP growth rates, a global commodity supercycle, surging FII inflows, and robust corporate earnings, the Sensex climbed from around 3,000 in mid-2003 to a then-record of over 21,000 in January 2008. The global financial crisis of 2008–09 then inflicted severe damage, with the index plunging to below 8,000 by March 2009 - a fall of over 60% in roughly a year.

Recovery came swiftly. By 2014, the Sensex had not only reclaimed its earlier peak but surpassed it. The years 2014–2019 saw relatively steady growth, interrupted by brief corrections. Then came the COVID-19 pandemic in March 2020 - the Sensex crashed nearly 40% in a matter of weeks before staging one of the most remarkable recoveries in its history, driven by massive global liquidity, retail investor participation, and digital-economy tailwinds. The index crossed 60,000 for the first time in September 2021, 70,000 in December 2023, and continued to set new milestones thereafter.

Each of these milestones - 1,000, 5,000, 10,000, 20,000, 50,000, 70,000 - became cultural landmarks in India, reported as front-page news and debated in tea stalls and corporate boardrooms alike. The Sensex's journey across these thresholds is, in many ways, a narrative of India's own economic transformation.

How the Sensex is Calculated: The Free-Float Market Capitalisation Method

The methodology used to calculate the Sensex has evolved over time. Until 2003, the index used a full market capitalisation method. In September 2003, the BSE migrated to the free-float market capitalisation methodology, aligning itself with global best practices followed by indices like the S&P 500 and the MSCI family of indices. Understanding this methodology is essential for any serious investor.

Market capitalisation, at its simplest, is the total market value of a company's outstanding shares. It is calculated by multiplying the current share price by the total number of shares outstanding. However, in the full market capitalisation approach, all shares - including those held by promoters, governments, and strategic investors that are never actually traded - are included. This overstates the 'investable' or 'tradeable' portion of the company.

Free-float market capitalisation corrects this by counting only those shares that are freely available for trading in the market. Shares held by promoters, founders, governments, and entities that have declared their intention to hold shares without trading them are excluded. What remains is the float - the shares genuinely available to the investing public.

The Free-Float Market Capitalisation of each company is calculated as: Free-Float Market Cap = Current Share Price × Free-Float Shares

Where Free-Float Shares = Total Shares Outstanding × Free-Float Factor (IWF)

The Investable Weight Factor (IWF) represents the proportion of total shares that are freely tradeable. For example, if a company has 100 crore shares outstanding, and 40 crore are held by promoters with no intention to trade, the free-float shares would be 60 crore, giving an IWF of 0.60.

To calculate the Sensex value itself, the BSE uses the following approach:

Sensex = (Sum of Free-Float Market Cap of all 30 companies / Base Market Cap) × Base Index Value

The Base Market Cap is the free-float market cap of the 30 constituent companies as measured in the base year 1978–79. The Base Index Value is 100. As market caps of constituent companies change with daily price movements, the numerator changes, causing the index to move up or down.

Why does this methodology matter? First, it ensures that the index accurately reflects the performance of shares that investors can actually buy and sell. A company may have a massive total market cap, but if most shares are locked with promoters, the practical impact on the market is much smaller. Second, it reduces index manipulation risk, since only genuinely tradeable shares influence the index. Third, it facilitates easier and more accurate index replication by fund managers managing index funds or ETFs.

Intraday calculation is continuous. The Sensex is computed and published in real time throughout the trading session - from 9:15 AM to 3:30 PM IST on BSE - using live price feeds from member companies. This real-time nature is what allows the Sensex to serve as an instantaneous pulse of market sentiment.

It is also worth noting that corporate actions - such as stock splits, bonus issues, and rights issues - do not distort the index value. The BSE makes adjustments to the base market capitalisation whenever such events occur, ensuring continuity and comparability over time. This methodology makes the Sensex a reliable longitudinal measure of market performance.

Criteria for Selecting the 30 Sensex Constituent Companies

Perhaps the most frequently asked question about the Sensex is: how do the 30 companies get chosen? The selection process is rigorous and transparent, governed by the BSE's Index Committee - a group comprising independent directors, market practitioners, and academicians. The criteria ensure that only companies of the highest quality, liquidity, and representativeness are included.

The primary criteria applied are as follows:

The company must be listed on the BSE. This seems obvious, but it is worth stating: the Sensex is a BSE index, and only companies listed on the Bombay Stock Exchange are eligible. The company must have a listing history of at least one year, giving the committee sufficient data to assess trading behaviour.

The company must have traded on every single trading day in the past year. This is the liquidity screen. A company that misses even a single trading day is considered insufficiently liquid for inclusion. This stringent requirement ensures that all 30 constituents are genuinely active and liquid stocks.

The company is ranked among the top companies on the BSE based on average free-float market capitalisation in the past six months. Market cap is not just assessed on a single date - it is averaged to reduce the influence of short-term price spikes or distortions.

The company's contribution to the index should be meaningful - each constituent ideally contributes at least 0.5% of total index market cap. This prevents the inclusion of companies that are too small to meaningfully represent the index.

The company must be among the top companies by average daily turnover (in value terms) and by Impact Cost. Impact cost is a crucial concept: it measures the actual cost of executing a transaction of a given size (typically ₹10 lakh) in the market, reflecting true liquidity. A lower impact cost means the stock can be bought or sold easily without significantly moving its price. Impact cost must be less than or equal to 1% for at least 90% of the observations over the past six months.

Final selection also involves a subjective assessment of sectoral representation. The committee aims to ensure that the 30 companies collectively represent the major industries of the Indian economy. If two equally qualified companies are competing for the last slot and one represents an underrepresented sector, the latter may be preferred. This ensures the Sensex remains a credible proxy for the economy as a whole.

Reviews of the index composition are conducted semi-annually, typically in June and December of each year. A company can be added to or excluded from the index based on changes in its market cap, trading activity, or free-float status. When a company is excluded, it does not mean the company is in trouble - it simply means another company now better satisfies the selection criteria.

Historically, the Sensex's composition has reflected the evolution of the Indian economy. In the early days, manufacturing and textile companies dominated. Through the 1990s and 2000s, information technology and software services companies gained significant weight. More recently, private sector banks, non-banking financial companies (NBFCs), consumer goods firms, and new-economy companies have taken prominent positions. This shifting composition is itself a story of how India's economic structure has changed over four decades.

Sensex vs Nifty 50: Understanding the Two Key Benchmarks

A common source of confusion for new investors is the existence of two major Indian equity indices - the Sensex and the Nifty 50 - that appear to tell broadly similar stories but belong to different exchanges and have different compositions. Understanding the distinction is important for investors who want to benchmark their portfolios intelligently.

The Sensex is the flagship index of the Bombay Stock Exchange (BSE), covering 30 large-cap companies. The Nifty 50 is the benchmark index of the National Stock Exchange (NSE), covering 50 large-cap companies. Both use the free-float market capitalisation methodology and are calculated in real time. Both are widely regarded as credible indicators of the Indian equity market's overall direction.

The key differences are:

Number of constituents: The Sensex has 30 companies; the Nifty 50 has 50. The Nifty's broader coverage means it represents a slightly wider cross-section of the economy, though both remain large-cap focused. Due to its larger sample, the Nifty 50 is often preferred by fund managers when constructing index funds and exchange-traded funds (ETFs).

Exchange affiliation: Sensex is BSE's index; Nifty 50 is NSE's. Futures and options on the Sensex are traded on the BSE's derivatives segment, while Nifty futures and options - by far the more actively traded in terms of volume - are traded on the NSE. In terms of derivatives trading, Nifty products enjoy significantly higher liquidity.

Correlation: Despite these differences, the two indices are extremely highly correlated - typically above 0.99 in terms of daily return correlation. They move in almost perfect lockstep. When the Sensex rises 1%, the Nifty almost always rises by approximately the same magnitude. This makes intuitive sense, since the 30 Sensex companies are a subset of the Nifty 50's universe, and both track the same large-cap Indian equity market.

Base value and base year: The Sensex has a base value of 100 set in 1978–79. The Nifty 50 has a base value of 1,000 set on 3 November 1995. Since they started from different base values on different dates, absolute comparisons of the two numbers are meaningless; only their percentage movements relative to their own histories matter.

Beyond these two headline indices, the BSE and NSE both publish a vast family of related indices. The BSE100, BSE200, BSE500, and BSE MidCap and SmallCap indices offer broader market coverage. The NSE publishes the Nifty Next 50, Nifty Midcap 150, Nifty Smallcap 250, Nifty Bank, Nifty IT, Nifty FMCG, and dozens of sector-specific and thematic indices. Together, this ecosystem of indices allows investors to track virtually every segment of the Indian equity market. However, when people casually refer to 'the market,' they are almost always referring to the Sensex or the Nifty 50.

What Moves the Sensex: Key Drivers and Influencing Factors

The Sensex does not move randomly. While short-term fluctuations may appear chaotic, the index's movements over time are driven by a complex interplay of domestic and global factors. Understanding these drivers helps investors contextualise market moves and make more informed decisions.

Corporate Earnings: The most fundamental driver of any stock index is corporate earnings. The Sensex ultimately reflects the collective profitability of its 30 constituent companies. When companies report strong revenue growth, expanding margins, and rising profits - especially during quarterly earnings seasons (April–June, July–September, October–December, January–March) - stock prices typically rise, lifting the index. Conversely, earnings misses or profit warnings can drag the index lower.

Macroeconomic Data: India's GDP growth rate, inflation figures (Consumer Price Index and Wholesale Price Index), industrial production data (IIP), trade balance, and fiscal deficit numbers all influence market sentiment. Strong GDP growth or falling inflation typically buoys investor confidence, while stagflation or slowing growth can depress the index.

RBI Monetary Policy: The Reserve Bank of India's decisions on the repo rate - the rate at which it lends to commercial banks - have a direct bearing on market liquidity and corporate borrowing costs. Rate cuts are generally positive for equities as they lower borrowing costs for companies and make debt instruments relatively less attractive, pushing capital toward equities. Rate hikes can have the opposite effect. Markets typically rally or fall in anticipation of RBI Monetary Policy Committee (MPC) meetings.

Foreign Institutional Investor (FII) Flows: India's equity market is significantly influenced by the capital flows of foreign portfolio investors. When global risk appetite is high and India's relative growth story is compelling, FIIs pour money into Indian equities, driving the Sensex higher. When global risk aversion rises - due to geopolitical events, US Federal Reserve tightening, or global recessions - FIIs sell Indian equities and take their money home, causing sharp corrections. The NSE and BSE publish daily FII and DII (Domestic Institutional Investor) net buying/selling data, which is closely watched.

Government Policy and the Union Budget: Major policy announcements - infrastructure spending plans, tax reforms, production-linked incentive (PLI) schemes, privatisation announcements, and changes to capital gains tax - can move the Sensex significantly. The Union Budget, presented every year in February, is one of the most anticipated events in India's financial calendar. Markets often rally in the weeks before the budget on hopes of pro-growth measures and correct sharply if the announcements disappoint.

Global Cues: The Indian market does not operate in isolation. Movements in major global indices - the US Dow Jones, S&P 500, Nasdaq, as well as European and Asian markets - heavily influence the Sensex, especially at the open. Global commodity prices (crude oil, gold, metals), the US dollar index, and global interest rate expectations all filter through into Indian equity valuations.

Geopolitical Events: Wars, border tensions, terrorist attacks, pandemics, and major natural disasters can trigger sharp risk-off moves in global and Indian markets. The Sensex fell dramatically when the COVID-19 pandemic struck in March 2020, when the Kargil conflict escalated in 1999, and during various geopolitical flashpoints over the years.

Currency Movements: The INR/USD exchange rate influences the Sensex, particularly through its effect on export-oriented companies (IT, pharmaceuticals) and import-dependent industries (oil refiners, metal companies). A weakening rupee boosts earnings for dollar-earning IT companies but hurts companies with large dollar-denominated debt or import costs.

Market Sentiment and Technical Factors: In the short term, market psychology, technical levels (support and resistance zones), derivative expiries (monthly futures and options contracts expire on the last Thursday of each month on NSE), and programme trading can amplify moves beyond what fundamentals alone would justify.

Sensex as an Economic Indicator: What Does It Tell Us?

A common assertion you will hear is that the stock market is a 'leading indicator' of the economy. The Sensex, as the most-watched proxy of the Indian equity market, is often used in this context. But what exactly does it mean for the Sensex to be a leading indicator, and how reliable is this relationship?

In economic theory, a leading indicator is one that tends to change before the broader economy begins to follow a particular pattern. Stock markets are considered leading indicators because they aggregate the forward-looking expectations of millions of investors. When institutional investors and analysts expect corporate earnings and economic growth to accelerate six to twelve months from now, they buy stocks today, pushing the index higher. This is why markets often recover well before the underlying economy does - as was strikingly demonstrated in 2020, when the Sensex had rebounded strongly by November even as India was still recording high COVID-19 case counts and economic contraction.

However, the Sensex as an economic indicator has important limitations. First, it represents only 30 companies - all large-cap, primarily from the organised corporate sector. India's economy is vast and diverse, with enormous contributions from agriculture, small and medium enterprises (SMEs), the unorganised sector, and rural consumption, none of which are directly represented in the Sensex. The index can therefore diverge from the lived economic reality of the majority of Indians.

Second, markets can be irrational in the short term. Periods of excessive optimism (bubbles) and excessive pessimism (crashes) mean the Sensex can significantly overshoot or undershoot its 'fundamental' value for extended periods. The late 1990s dotcom bubble and the 2008 peak are examples of the market temporarily losing touch with underlying fundamentals.

Third, FII capital flows can move the Sensex in ways that are largely driven by global rather than domestic factors. A global risk-off event in US markets can drag the Sensex down sharply even if India's domestic economic outlook is perfectly healthy.

Despite these caveats, the Sensex is a valuable tool in the economic analyst's toolkit. It is regularly cited by the RBI in its monetary policy reports, by the Ministry of Finance in economic surveys, and by international organisations like the IMF and World Bank when discussing India's economic health. The level of the Sensex also influences consumer and business confidence: a rising market tends to make households feel wealthier and more willing to spend (the 'wealth effect'), while a falling market can dampen sentiment.

Policymakers also watch the Sensex as a barometer of investor confidence in their decisions. A sharp market fall following a policy announcement is a signal - though not always a definitive one - that markets are unhappy with the decision. In this indirect way, the Sensex provides a form of real-time feedback to governments and central banks.

For retail investors, the key practical insight is this: the Sensex reflects the collective wisdom - and sometimes the collective folly - of the market at any given moment. It is a useful reference point, but it should never be the sole factor driving investment decisions.

Sensex and Investing: Index Funds, ETFs, and Benchmarking

For most retail investors, understanding the Sensex is not purely academic - it has direct practical implications for how they invest. The most direct way to 'invest in the Sensex' is through index funds or exchange-traded funds (ETFs) that track the BSE Sensex.

An index fund is a type of mutual fund that passively replicates the composition of a benchmark index. A Sensex index fund would hold shares of all 30 constituent companies in the same proportion as their weight in the Sensex. The fund's objective is not to beat the Sensex but to match it as closely as possible, earning returns that mirror the index's performance minus a small tracking error and expense ratio. SEBI regulates mutual funds in India, including index funds, and requires fund houses to clearly disclose tracking errors and expense ratios.

An ETF (Exchange-Traded Fund) based on the Sensex works similarly but is listed and traded on the stock exchange (BSE or NSE) like a regular share. You can buy or sell Sensex ETF units in real time during market hours through your trading account, unlike a regular mutual fund where transactions are processed at the end-of-day NAV.

The case for Sensex index funds and ETFs rests on decades of academic research and practical experience globally: over long time horizons, most actively managed large-cap equity funds fail to consistently outperform their benchmark index after fees. This is partly because large-cap Indian stocks are well researched and efficiently priced, leaving less room for active managers to find mispriced opportunities. Index investing thus offers market-matching returns at very low cost.

Beyond direct investment vehicles, the Sensex is used ubiquitously for benchmarking. If you hold a portfolio of Indian large-cap stocks, your performance is meaningfully evaluated against the Sensex. If your portfolio returned 18% in a year when the Sensex returned 20%, you 'underperformed' the benchmark by 2 percentage points - a concept known as negative alpha. If your portfolio returned 23% against the Sensex's 20%, you generated 3 percentage points of positive alpha. This benchmarking framework allows investors to judge whether their stock-picking or fund-selection skills are actually adding value.

For derivatives traders, the Sensex has a dedicated futures and options (F&O) segment on the BSE. Sensex futures are contracts that allow participants to take leveraged positions on the future level of the index. These instruments are used by institutional investors to hedge equity portfolios, by proprietary traders to express directional views, and by sophisticated retail participants for speculation. It is important to note that F&O trading carries significant risk and is not suitable for most retail investors. SEBI has mandated specific risk disclosures for F&O participants and periodically reviews eligibility criteria for this segment.

For long-term retail investors, the simplest and most powerful use of the Sensex is as a reference point for systematic investing. Historically, the Sensex has delivered significant returns over long periods despite short-term volatility - from a base of 100 in 1979 to tens of thousands today is a testament to the power of Indian corporate earnings growth compounded over decades. Investing regularly through market cycles, without trying to time the Sensex's peaks and troughs, is a strategy broadly supported by evidence. However, past performance is not a guarantee of future results, and all equity investments carry risk.

How to Read and Interpret Sensex Movements

One of the skills every retail investor should develop is the ability to read Sensex data intelligently - not just whether it went up or down, but what the magnitude, context, and trend of the movement implies. Here is a practical framework.

Absolute vs Percentage Moves: As the Sensex climbs to higher absolute levels, a move of 500 points today is far less significant than a 500-point move was when the index was at 5,000. Percentage moves are always more meaningful than absolute point moves. A 500-point fall from 70,000 (a 0.71% decline) is a routine fluctuation; a 500-point fall from 5,000 (a 10% decline) would signal a significant event. Always interpret Sensex moves in percentage terms.

Volume and Breadth: The Sensex level tells you the direction of price movement but not the conviction behind it. Examining market breadth - the ratio of advancing stocks to declining stocks across the BSE - gives a fuller picture. A Sensex rise driven by only a handful of heavy-weight stocks while the majority of BSE-listed shares are falling suggests weak underlying sentiment. Strong broad-based advances where the majority of stocks participate indicate healthier market conditions.

Divergence with Other Indices: Watch for divergences between the Sensex and broader indices like the BSE MidCap or BSE SmallCap. When the Sensex is at record highs but mid-cap and small-cap indices are significantly below their peaks, it may indicate that the rally is narrow and potentially unsustainable. Conversely, small-cap outperformance alongside Sensex gains often signals a broader bull market phase.

Rolling Returns vs Point-to-Point Returns: A common mistake is to focus only on point-to-point returns (e.g., 'the Sensex has risen X% this year'). Rolling returns - calculated over every possible holding period of a fixed length (say, every 5-year period since 1979) - give a much more honest picture of the distribution of outcomes an investor might expect. They reveal that while most long holding periods have been rewarding, there have been stretches where the index delivered disappointing returns.

Circuit Breakers and Market Halts: SEBI has put in place index-based circuit breakers on both the BSE and NSE. If the Sensex falls by 10%, 15%, or 20% in a single session, trading is halted for specified durations to allow for orderly price discovery. These circuit breakers are designed to prevent panic-driven free-falls and give investors time to reassess. Understanding that these safeguards exist can help investors remain calm during periods of sharp volatility.

Expiry-Related Volatility: Monthly derivatives expiry on the last Thursday of each month tends to create above-average intraday volatility in the Sensex. Institutional participants roll over large futures positions, and option strikes near the money experience rapid time decay. Retail investors should be aware that unusual moves on or around expiry days may not reflect genuine directional momentum.

By developing the habit of reading Sensex movements contextually - using percentage changes, breadth data, inter-index comparisons, and an awareness of structural market events - investors become far more sophisticated consumers of financial information.

Sensex Milestones, Records, and Market Cycles

Studying the Sensex's historical milestones provides more than nostalgia - it offers a practical education in market cycles, investor psychology, and the consequences of various macroeconomic events on equity prices. Every investor benefits from internalising these patterns, not to predict the future (which is impossible), but to understand the nature of the asset class they are participating in.

The journey from 100 to 1,000 took approximately 12 years (1979 to 1991) - reflecting the pre-liberalisation era of a largely closed, slow-growing economy with limited corporate listing activity and minimal foreign participation.

The journey from 1,000 to 10,000 took approximately nine years (1991 to 1999–2000), encompassing the liberalisation boom, IT boom, and several intervening crises including the 1992 securities scam, the 1994–1995 correction, the 1997 Asian financial crisis, and the 1998 nuclear tests that triggered international sanctions.

After touching 6,000 briefly in 2000 and crashing to below 3,000 in 2002–2003, the Sensex embarked on one of its most powerful bull runs, reaching 21,000 in January 2008. The 2008–09 global financial crisis then erased over 60% of that gain. This period powerfully illustrates the concept of drawdown - the peak-to-trough decline in portfolio value - and why investors with concentrated exposure or leveraged positions suffered the most.

The recovery from 2009 to 2014 was characterised by intermittent progress: strong FII buying, India's relative resilience in the post-crisis world, and improving corporate governance brought the Sensex back to and beyond its previous peak. From 2014 onwards, domestic institutional investors - particularly through systematic investment plans (SIPs) in mutual funds - became an increasingly important force, providing more stable, domestically-anchored buying pressure that partially offset FII outflows.

The COVID-19 crash of February–March 2020 was unprecedented in its speed: the Sensex lost over 38% in roughly 40 trading sessions. What followed was equally extraordinary - the index recovered its losses by November 2020 and went on to set record after record through 2021. This episode reinforced two important lessons for retail investors: first, sharp corrections are a normal feature of equity markets, not anomalies; second, investors who stayed invested (or added systematically) during the crash were rewarded handsomely in the subsequent recovery.

Across all these cycles, a consistent pattern emerges: the Sensex has always eventually recovered from its deepest corrections and gone on to set new highs. This does not guarantee future outcomes, and the journey involves real pain for investors who are forced to sell at bottoms due to financial need or panic. But for patient, long-term investors with appropriate asset allocation, the Sensex's historical trajectory demonstrates the wealth-creating potential of equity as an asset class over time. SEBI and market regulators continuously work to improve investor protection and market infrastructure, making the Indian equity market progressively safer and more transparent for retail participants.

Example

Key benefits

How it works

1. 1
   Identify 30 Constituent Companies

   The BSE Index Committee selects 30 large-cap, highly liquid companies listed on the BSE, representing diverse sectors, based on criteria including free-float market cap, trading frequency, and impact cost.

2. 2
   Determine the Free-Float Factor (IWF)

   For each company, the BSE calculates the Investable Weight Factor - the proportion of total shares that are freely available to trade, excluding promoter and strategic holdings.

3. 3
   Calculate Free-Float Market Capitalisation

   Each company's free-float market cap is computed by multiplying its current share price by its free-float shares (total shares × IWF), giving a measure of investable value.

4. 4
   Sum Free-Float Market Caps Across All 30 Companies

   The individual free-float market caps of all 30 constituent companies are aggregated to arrive at the total current free-float market cap of the Sensex basket.

5. 5
   Apply the Base Year Formula

   The Sensex value is calculated as (Current Total Free-Float Market Cap / Base Market Cap) × 100, where the base market cap reflects the free-float market cap of the 30 constituents in the base year 1978-79.

6. 6
   Real-Time Continuous Calculation

   This calculation is repeated continuously during BSE trading hours (9:15 AM to 3:30 PM IST) using live price feeds, producing a constantly updating Sensex value throughout the trading day.

7. 7
   Periodic Review and Rebalancing

   The BSE Index Committee reviews the index composition semi-annually. Companies that no longer meet the criteria are replaced by eligible candidates, and base market cap adjustments ensure continuity of the index series.

Formula

Sensex = (Aggregate Free-Float Market Cap of 30 Constituent Companies / Base Market Cap) × Base Index Value (100)

Free-Float Market Cap of a company = Current Share Price × (Total Shares Outstanding × Investable Weight Factor)

Key takeaways

Frequently asked questions

Related terms