Computation of SENSEX

Bombay Stock Exchange

SENSEX - The Barometer of Indian Capital Markets

• Introduction• Computation of Sensex

SENSEX• SENSEX was first compiled in 1986

BSE Chairman: Shri G.N. Bajpai, • It was compiled on "Market Capitalization Weighted "

(full-market capitalization) methodology(30 component stocks representing large, well-established and financially sound companies across key sectors).

Market Capitalization = (No of shares issued by the company )* (Current Market Price)

• Since September 1, 2003, SENSEX is being calculated on a free-float market capitalization methodology.

Full and Free Float Market Capitalization

Under the 'full-market capitalization' methodology, the total market capitalization of a company, irrespective of who is holding the shares, is taken into consideration for computation of an index.

However, if instead of taking the total market capitalization, only the Free-float market capitalization of a company is considered for index calculation, it is called the Free-float methodology.

Free-float market capitalization is defined as that proportion of total shares issued by the company which are readily available for trading in the market.

Free Float MethodThe below given shares will not come under Free Float Method

• Shares held by founders/directors/ acquirers (which has control element)

• Shares held by persons/ bodies with "Controlling Interest"

• Shares held by Government as promoter/acquirer

• Holdings through the FDI Route

• Strategic stakes by private corporate bodies/ individuals

• Equity held by associate/group companies (cross-holdings)

• Locked-in shares and shares which would not be sold in the open market in normal course.

The remaining shareholders fall under the Free-float category.

Free Float Market Capitalization

The "free-float market capitalization-weighted" methodology is a widely followed index construction methodology on which majority of global equity indices are based; all major index providers like MSCI, FTSE, S&P and Dow Jones use the free-float methodology.

MSCI acronym stands for Morgan Stanley Capital International EuropeFTSE - Financial Times Stock Exchange, UK

Index SpecificationBase Year 1978-79

Base Index Value 100

Date of Launch 01/01/1986

Method of calculation Launched on full market capitalization method and effective September 01, 2003, calculation method shifted to

free-float market capitalization. Number of scrips 30

Index calculation frequency Real Time

SENSEX Calculation MethodologySENSEX is calculated using the "Free-float Market Capitalization" methodology, where the level of index at any point of time reflects the free-float market value of 30 component stocks relative to a base period

The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.

SENSEX CalculationSENSEX:The formula for calculating the Sensex is

Sensex = sum of free flow market capitalization for 30 stocks * Index factor

Free-Float Market Capitalization = Market Capitalization * Free Float FactorMarket Capitalization = (No of shares issued by the company )* (Current Market Price)

Index Factor = Base Index Value in 1978-79/Market capitalization value in 1978-79(Base Index Value = 100) ( Base Market Capitalization = 8285)

SENSEX = 1427209.86X 0.0122 = 17411SENSEX = 1414225.41*0.0122 = 17226*** BSE has designed a Free-float format, which is filled and submitted by all index companies on a

quarterly basis. (Format available on http://www.bseindia.com/about/downloads.asp) BSE determines the Free-float factor for each company based on the detailed information submitted by the companies in the prescribed format.

In order for BSE to track the free-float of company on a regular basis, Companies are requested to file the forms with BSE for each quarter of the year within 15 days of each quarter ending.

NIFTY Calculation

NSE:The formula for calculating the Nifty is

NIFTY = sum of free flow market capitalization for 50 stocks * Index factor

Free-Float Market Capitalization = Market Capitalization * Free Float Factor

Market Capitalization = (No of shares issued by the company )* (Current Market Price)

Index Factor = Base Index Value in 1995/Market capitalization value in 1995

(Base Index Value = 1000)

Scripwise Weightages in SENSEX

Scripwise Weightages in SENSEX

BSE SENSEX Live Streamer

http://www.bseindia.com/streamer.htm

SENSEX - Scrip Selection Criteria1. Equities of companies listed on Bombay Stock Exchange Ltd. (excluding companies classified in

Z group, listed mutual funds, scrips suspended on the last day of the month prior to review date, scrips objected by the Surveillance department of the Exchange and those that are traded under permitted category) shall be considered eligible

2. Listing History: The scrip should have a listing history of at least three months at BSE. An exception may be granted to one month, if the average free-float market capitalization of a newly listed company ranks in the top 10 of all companies listed at BSE. In the event that a company is listed on account of a merger / demerger / amalgamation, a minimum listing history is not required.

3. The scrip should have been traded on each and every trading day in the last three months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc.

4. Companies that have reported revenue in the latest four quarters from its core activity are considered eligible.

5. From the list of constituents selected through Steps 1-4, the top 75 companies based on free-float market capitalisation (avg. 3 months) are selected as well as any additional companies that are in the top 75 based on full market capitalization (avg. 3 months).

6. The filtered list of constituents selected through Step 5 (which can be greater than 75 companies) is then ranked on absolute turnover (avg. 3 months).

SENSEX - Scrip Selection Criteria7. Any company in the filtered, sorted list created in Step 6 that has

Cumulative Turnover of >98%, are excluded, so long as the remaining list has more than 30 scrips.

8. The filtered list calculated in Step 7 is then sorted by free float market capitalization. Any company having a weight within this filtered constituent list of <0.50% shall be excluded

9. All remaining companies will be sorted on sector and sub-sorted in the descending order of rank on free-float market capitalization.

10. Industry/Sector Representation: Scrip selection will generally attempt to maintain index sectoral weights that are broadly in-line with the overall market.

11. Track Record: In the opinion of the BSE Index Committee, all companies included within the SENSEX should have an acceptable track record.