How are the Sensex and Nifty calculated?
Sensex is designed and based on globally accepted construction and review methodology. Sensex is calculated, taking into consideration the stock prices of 30 different companies listed on BSE. Its value is calculated using the "free-float market capitalization" method. This method is one of the best ways of calculating a stock market index. BSE also calculates a dollar-linked version of Sensex. The base year of Sensex is 1978-79, and the base value is 100. The 30 companies which are taken into consideration are changed from time to time. This change is done to make the Sensex an accurate index.
Which 30 Companies?
The 30 companies that are used to find out the Sensex value are selected and reviewed by an "index committee". These are different companies from different sectors representing a sample of large, liquid and representative companies. The 30 companies are changed in a timely manner. The BSE index committee decides on which stock to include in the Sensex and which stock should be removed from the Sensex. This "index committee" is made up of academicians, mutual fund managers, finance journalists, independent governing board members and other participants in the financial markets.
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