Context

Adani Ports and Special Economic Zone Ltd (APSEZ) will become the first Adani Group company to be included in the Sensex at the Bombay Stock Exchange.

• APSEZ will replace Wipro at the Sensex.
• APSEZ and Adani Enterprises, the flagship of the Adani Group, are already part of the Nifty at the National Stock Exchange.

What is the Sensex at the BSE?

• SENSEX stands for Stock Exchange Sensitive Index and is the Benchmark Index of the Bombay Stock Exchange in India. The term was coined by stock market expert Deepak Mohini.
• BSE 30: It represents a basket of 30 stocks representing the country’s largest, financially-sound companies across key sectors of the Indian economy that are listed on BSE Ltd.
  • SENSEX  is also  traded internationally on the EUREX as well as leading exchanges of the BRICS nations (Brazil, Russia, China and South Africa).

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• • Example: Reliance Industries, ICICI Bank, and ITC Ltd.,Axis Bank, Asian Paints, Bajaj Finance, Bharti Airtel, Coal India, HCL Technologies, Hindustan Unilever, Tata Consultancy Services, Larsen & Toubro, etc.
• Launched: Sensex is the country’s oldest and most tracked bellwether index launched in the year 1986.
  •  It is the oldest index in India and provides time series data from 1979.

• Market capitalisation: The total market capitalisation or the total value of all listed shares, as of May 24 2024 of BSE-listed firms was Rs 419.99 lakh crore.Calculation method: Sensex  is calculated based on the “Free-float Market Capitalisation” methodology with the formula being,
  • Free-float: It  is that proportion of total shares issued by the company that is readily available for trading to the general public.
  • It does not include promoters’ holding, government holding, and other shares that will not be available in the market for trading in the ordinary course of events.
• Selection Criteria: The Sensex is reconstituted biannually, in June and December of every year by the Index Committee and a company has to fulfill certain conditions to be listed in the Sensex.  
  • BSE listing and Trade Frequency: It must have a listing history of at least six months at BSE, and should have traded on every trading day at the BSE during this six-month reference period.
  • The stock should have a derivative contract ie.  

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• • A derivative is a financial instrument whose value is based on the value of an underlying asset like equities and currency.
• Market Capitalisation: The company must be among the top 75 companies based on their average total market cap and should have a minimum free-float market cap of 0.50% after market cap and liquidity criteria are met.
• Liquidity terms: The total weight of average daily value traded (ADVT) should be less than 98% to be included in the index.
  • The cumulative weight of the three-month average daily value traded (ADVT) is calculated for companies that meet the eligibility requirements. 
• Investment Routes:
  • Direct Investment: Investors can invest in the shares of a company by opening a trading account through a registered trade broker
  • Exchange Traded Funds: It provides an indirect way to invest in Sensex by offering diversification across multiple stocks and aiming to replicate the performance of the index
  • Index Funds: They passively track Sensex performance by holding the same stock in the same proportion as the index
• Significance: 
  • It is considered a barometer of investor sentiments and economic trends.
  • Market Forecasting: The rise and Fall of the Sensex reflects the mood of the market whereby a rise suggests optimistic sentiments and a fall is seen as pessimistic sentiments in the market.
  • Act as a sophisticated mechanism for evaluating the direction and vitality of the Indian stock market for both investors and analysts.

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