Article

Sensex
June 07 , 2012

The BSE Sensex is an index, which means that it is a barometer to stock market performance. The equity markets cover the ~4,500 listed companies, and the Sensex takes 30 selected larger stocks among them. It considers the prices of these stocks in the BSE on a daily basis, and weighs them by what is called free float market capitalisation.

While the Sensex is often considered to represent the market as a whole, this is somewhat inaccurate. It measures the performance of the larger stocks, which often behave differently from the rest of the market. Yet, the Sensex and its sibling the NSE Nifty, are the most measured barometers of Indian equity markets and several institutional and retail investors India and abroad track them very closely and make investment decisions on their basis.

An important point to note is that Sensex number in itself is irrelevant and does not represent anything. The useful parameter to measure is the gain or loss over a period of time, especially in percentage terms.

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