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What is Sensex and How it is Calculated

What is Sensex ?

This is a frequently asked questions in Bank interviews. Everybody know that these are stock indexes. But interviewers expect you to speak little more about this.

What is Sensex and Nifty ?

Sensex is is an index of top 30 stocks in Bombay stock exchange (BSE) and Nifty is an index of top 50 stocks in National stock exchange (NSE)

How value of Sensex is calculated

Value of Sensex is calculated using "Free Float Market Capitalization" method.

Sensex is calculated on the basis of Free Float Market Capitalization of top 30 companies included the index.

Free float ratio is number of outstanding shares available for general public to trade 

Sensex was started on 1 April 1979. At that time the base value was 100.

For example on 01-04-1979, the free float market capitalization of top 30 shares was 1000 crores. On 2 April 1979, free float market capitalization increased to 1050 crores. So the value increased by 5%. Value of Sensex will also be increased by 5% and value will become 105.

Formula to calculate Sensex

It's nothing but submission of free float market capitalization top 30 stocks.

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