Understanding Sensex: India’s Stock Market Index

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The Sensex is a stock market index that represents the performance of the top 30 companies listed on the Bombay Stock Exchange (BSE) in India. It is often considered as a barometer of the Indian stock market and is widely used to track the overall performance of the country’s economy.


The term “Sensex” is derived from the words “Sensitive” and “Index.” It was first introduced in 1986 and is managed and calculated by the BSE. The index is based on the free-float market capitalization of the companies included in it, which means it takes into account only the shares that are available for trading in the market.

The Sensex is calculated using the market capitalization-weighted methodology, which gives more weightage to companies with higher market capitalization. This means that the performance of larger companies has a greater impact on the index compared to smaller ones.

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The index is reviewed and updated periodically to ensure that it reflects the current market scenario. Companies can be added or removed from the index based on various criteria such as market capitalization, liquidity, and sector representation.

Investors and analysts closely monitor the Sensex as it provides insights into the overall direction of the stock market. It is used as a benchmark to compare the performance of individual stocks, mutual funds, and other investment products. Changes in the Sensex are often seen as indicators of market sentiments and can influence investor behavior.

Overall, the Sensex plays a crucial role in the Indian financial markets and serves as a key indicator of the country’s economic health and investor confidence.

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