What is Sensex?

The S&P BSE Sensex, is the benchmark stock market index of the Bombay Stock Exchange (BSE) in India. It represents the performance of the top 30 well-established and financially sound companies listed on the BSE across various sectors.
The index is calculated using the free-float market capitalization method, which means it takes into account only the shares available for public trading rather than considering the entire market capitalization of the companies. The index is value-weighted, with companies having higher market capitalization having a greater impact on the index's movements.
The base year for calculating the Sensex is 1978-79, and the base value is set to 100. As the stock prices of the constituent companies change, the index value fluctuates, reflecting the overall movement of the Indian stock market.

How do work sensex in share market?

The Sensex works as a key indicator of the overall performance of the Indian stock market. It reflects the collective movement of the top 30 companies listed on the Bombay Stock Exchange (BSE) based on their market capitalization and liquidity. Here's how the Sensex works in the share market:
Selection of Constituent Companies: The BSE selects the top 30 companies to be part of the Sensex based on certain criteria like market capitalization, trading volume, and other financial factors. These companies are usually leaders in their respective industries and represent a significant portion of the total market capitalization on the exchange.
Calculation Methodology: The Sensex is calculated using the free-float market capitalization method. This means that it considers only the shares available for public trading and not the total number of shares issued by the company. It gives more weightage to the shares that are available for trading in the market.
Value-Weighted Index: The index is value-weighted, which means that companies with higher market capitalization have a greater impact on the index's movements. A company with a larger market capitalization will influence the Sensex more than a smaller company.
Base Year and Base Value: The base year for calculating the Sensex is 1978-79, and the base value is set to 100. The index value is derived by comparing the current market capitalization of the constituent companies to their market capitalization in the base year.
Index Rebalancing: The composition of the Sensex is periodically reviewed, typically every quarter, to ensure that it reflects the changing market conditions and company performances. If a constituent company no longer meets the selection criteria or if a more suitable company emerges, changes are made to the index constituents.
Impact on the Share Market: The Sensex's movement has a significant impact on investor sentiment and the broader share market. A rising Sensex is generally considered a positive sign, indicating bullish market sentiments, while a falling Sensex can signify bearish market sentiments. Investors often use the Sensex as a benchmark to assess the performance of their investments and to make informed decisions.