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What is Sensex?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 30 October 2016
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Sensex is a benchmark index used to track performance in Indian markets. It is the oldest benchmark index used at the Bombay Stock Exchange and is widely utilized by investors and people interested in tracking economic conditions in India. The latest Sensex quotes are available from a number of sources including financial publications, news agencies, and the Bombay Stock Exchange itself. Like other benchmark indexes, although the Sensex contains relatively few stocks, they are important ones, and it acts as a bellwether for the economy.

Established in 1986, Sensex is an index of 30 Indian stocks, all traded on the Bombay Stock Exchange. The index is compiled using a free-float capitalization method, looking at the number of shares available for trade on the index. Together, the 30 stocks usually comprise around 20% of the total capitalization of the exchange. The index is reordered periodically to reflect changing economic trends, as well as growth in Indian companies.

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Officially known as the Bombay Exchange Sensitive Index, Sensex is used in a number of ways by investors and economists. People can track performance on the index to get an idea of how the Indian market is behaving and to take note of special events that may affect market performance. Volatility on the index usually translates into volatility on the stock exchange as a whole and dramatic rises and falls can also be associated with important market movements. Tracking these movements and responding to them rapidly is critical for investors interested in keeping ahead of the market.

The stocks listed on this exchange vary, depending on their performance on the market. People interested in finding out which stocks are currently included on the Sensex can look up the index to see which companies are represented. Being on a major stock index is usually a sign of economic well being for a company, showing that the company is growing, has numerous shares available for trade, and has a consistent history of good performance. For this reason, interest in trade of stocks on the index is usually very high and such stocks tend to be highly liquid in nature.

Performance of the Sensex can be compared with other Asian markets to get an overall idea of how economies in Asia are performing, and it can also be contrasted with other stock indexes around the world. Globally, markets can behave quite variably. Being able to take advantage of variations in global markets is a valuable skill for investors.

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