Friday, November 7, 2008

How to Calculate Sensex

Day by day now, the sensex is going down.
Please see below to know how this sensex is calculated.

Sensex is an indicator value of BSE(Bombay Stock Exchange). This value indicates whether the stocks value of major of the companies trading in BSE has gone up or down.

Sensex is calculated by taking into account of the free capitalization of the 30 companies trading in BSE. This 30 companies selection can vary from time to time, depending on the capitalization, trade history of the company etc.

The amount required to buy all the shares of the company (Multiply the share cost with the total number of shares) is called the Market Capitalization of the company.The company shares can be hold by founder, govt, controller, directorer, etc. Some companies allow the shares to be hold by public. These shares are called free float shares and the market in which free float shares are traded is called open market. Free float capitalization (Multiply the share cost with the total number of the free float shares)of the company is the amount to buy all the free float shares of the company.

The free float shares of the 30 companies will be taken and added together. This added value will be compared with the sensex base and the sensex value will be calculated. If this sensex value is high, most of the company's share cost has gone high or else gone low.

For example if the sensex value for free float capitalization(For 30 companies) 30000000 is 5000, then the sensex value for free float capitalization(For 30 companies)40000000 is calculated by the following way.

Sensex Value = (5000/30000000)*40000000

So the new sensex value = 6666.66

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