BSE : SENSEX : : NSE : CNX S & P NIFTY
some introduction on BSE first ........
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).
The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth.
Some points on BSE:
- First in India to introduce Equity Derivatives
- First in India to launch a Free Float Index
- First in India to launch US$ version of BSE Sensex
- First in India to launch Exchange Enabled Internet Trading Platform
- First in India to obtain ISO certification for Surveillance, Clearing & Settlement
- First to have an exclusive facility for financial training
Market Capitalisation
Liquidity
Continuity
Industry Representation
Listed History
Track Record
For the premier Stock Exchange that pioneered the stock broking activity in India , 125 years of experience seem to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "Bombay Stock Exchange Limited" by paying a princely amount of Re1.
Since then, the stock market in the country has passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. Bombay Stock Exchange Limited (BSE) in 1986 came out with a Stock Index that subsequently became the barometer of the Indian Stock Market.
SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing a sample of large, well-established and financially sound companies. The base year of SENSEX is 1978-79. The index is widely reported in both domestic and international markets through print as well as electronic media. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology.
In a market capitalization weighted index, each stock in the index affects the index value in proportion to the market value of all shares outstanding. In this type of index, the equity price is weighted by the market capitalization of the company ( share price * no. of outstanding shares). Hence each constituent stock in the index affects the index value in proportion to the market value of all the outstanding shares. This index forms the underlying for a lot of index based products like index funds and index futures.
Here , Index = (current market capitalistaion / base market cap) * Base value
where,
current market cap = Sum of ( current market price * outstanding shares ) of all securities in the index
base mkt cap = Sum of ( market price * issue size ) of all securities as on base date.
Outstanding Shares = Stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public. Shares that have been repurchased by the company are not considered outstanding stock.
They are also known as "issued shares" or "issued and outstanding".
This number is shown on company's balance sheet under the heading "Capital Stock" and is more important than the authorized shares or float. It is used in the calculation of many metrics including market capitalization and earnings per share (EPS).
From September 2003, the SENSEX is calculated on a free-float marke capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is a widely followed index construction methodology on which majority of global equity benchmarks are based.
As per the "free-float market capitalization" methodology, 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 = Price of Stock * number of shares.
This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization.
For example
Assume a one-stock index
Price of stock A is 300 on Jan 1, 2003 which is base year of the index, and the number of shares are 10000. Today stock is at 360 and number of shares are 15000
Index Today will be = [(360 * 15000) / (300 * 10000)] * 100
However, of the 15,000 shares outstanding not all will be available for trading on a daily basis. This is because the promoters will hold sizable shares to control the company. Besides, some shares may carry lock-in period; employee stock options, for instance.
Thus, experts suggest that we should weigh index by the number of shares available for trading. This number is called the free float.
The free-float method is seen as a better way of calculating market capitalization because it because it provides a more accurate reflection of market movements. When using a free-float methodology, the resulting market capitalization is smaller than what would result from a full-market capitalization method.
Due to its wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.
The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.
During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time, with the help of BOLT system ( BSE online trading system).
Closing Sensex on any trading day is computed taking the weighted average of all the trades on Sensex constituents in the last 30 minutes of trading session
The base year value adjustment ensures that additional issue of capital and other corporate announcements like bonus etc. do not destroy the value of the index
Index Cell - ensures that Sensex and all the other BSE indices maintain their benchmark properties by striking a delicate balance between high turnover in index scrips and its representative character
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