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How does the Indian Sensex function?

The Indian stock Exchange is extensive. Though there are stock exchanges in India like the Calcutta Stock Exchange, the Bombay Stock Exchange (BSE) based in Mumbai and the National Stock Exchange (NSE) based in Delhi are the most popular ones. Most of the stock trading in India happens through these two exchanges.

How can we land at these numbers?

The companies in these listings signify various industrial sectors of the Indian economy and have the most actively traded stocks on that particular exchange.

An index committee evaluates and selects the list of companies from time to time. They stick on to strict criteria for this process.

Free-float market capitalization method:

This is used to analyze an index. Market capitalization refers to the value of a company in terms of its shares. The index for BSE is calculated considering the top 30 companies. The index for NSE is computed for the top 50 companies.

Importance of the index

There are many aspects like news about the company or country, major acquisitions and company performances that drive the movement of the Indian Sensex. The Sensex India is important for many reasons. A few reasons can be stated as:

  • They function as standards of comparison for equity funds and other investments.
  • They indicate the returns on money invested in stock market.
  • They can be used for historical comparison of these against other investment form such as crude oil.
  • It is measured as a major indicator of the performance of the share market and accordingly the country’s economy too.
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