Adani Ports to enter Sensex

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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