Stock Market Sensex

If you are looking at stock markets, you have a lot of different choices. One of the most important ones to know about, however, is the SENSEX. This acronym stands for the Bombay Stock Exchange Sensitive Index, which has over 30 different stocks represented. They carefully pick their stocks to include large, financially sound stocks that will make you money.

The SENSEX is India's oldest stock index. Its age is not the only reason why is has a special place in the heart of all stock brokers. It is also well known because it is an effective gauge of the Indian stock markets as a whole. Many investors think that the SENSEX can be used categorically to predict trends and see themes on the entire Indian stock market at Mumbai. Another helpful perk of going with the SENSEX over other indexes is that it has the ability to track trends over a longer time period than its upstart competitors.

It may help you to think of the SENSEX as the Indian variety of the American Dow Average. Just like the SENSEX, the DOW Jones compiles the performance details of over 65 companies from a broad range of sources in order to provide you with an easy to understand resource. Most investors are familiar with the Dow Jones, so this comparison could help people that are unfamiliar with Indian stock markets.

The comparison between the SENSEX and the DOW Jones is also helpful for understanding how the SENSEX was formed and how it is calculated. The SENSEX is made up of blue chip stocks, just like the DOW. The stocks that are in the SENSEX represent 20% of the total stocks traded on the Indian stock exchange, just like the DOW represents a set proportion of the stocks traded on the American stock exchange.

Now for the details. The SENSEX is based on a complex mathematical model called the Free-Float model. To figure out this number, you need to multiply the number of shares available on the market by the number of stock. This is done for each stock before the number is divided by the secret SENSEX divisor. The complicated mathematical programs needed to figure out this number are rerun every 15 seconds.