What Is Sensex in the Stock Market?

The Sensex stock market index is best described as the Indian equivalent of the Dow Jones Industrial Average. Like the Dow in America, the Sensex tracks 30 of India's biggest and most profitable companies across most major sectors of the economy. Also like the Dow, the direction of the Sensex is often considered indicative of the overall state of Indian stocks.

Background

First published in 1986, the Bombay Stock Exchange Sensitive Index -- commonly called the BSE Sensex or just the Sensex -- is India's oldest stock market index. It is made up of 30 blue-chip stocks from the Bombay -- now called Mumbai -- exchange, with each stock's effect on the index weighted according to the company's market value. The Sensex uses 1978 to 1979 as its base period, with a base value of 100 index points. By the late 2000s and early 2010s, the index was regularly in the 15000- to 20000-point range, reflecting immense growth in the Indian economy.

Companies

As of late 2012, the 30 companies in the Sensex accounted for nearly half of the entire market capitalization of the Bombay Stock Exchange, which has about 5,000 listed companies. Most major sectors of the Indian economy are represented in the Sensex: In 2012, the index included five auto manufacturers; five energy companies; five companies involved in mining, minerals or metals; four telecommunications or computer companies; four companies involved in finance; three pharmaceutical manufacturers; two consumer-products companies; and two heavy-engineering companies.

U.S.-Traded Companies

Though all the Sensex companies are listed on the Bombay Stock Exchange, a handful of them also trade on the New York Stock Exchange in the form of American depositary receipts, or ADRs. An ADR trades just like a share of stock, but it is really a voucher issued by a bank that represents ownership of stock listed on a foreign exchange. The owner of an ADR can trade it in for the foreign stock, but it's usually more convenient to just hold onto the ADR, since it's denominated in dollars (as opposed to Indian rupees) and because the issuing bank converts any dividends to dollars for investors. Sensex companies that trade as ADRs include ICICI Bank, Tata Motors, Wipro, HDFC Bank and Infosys.

Tracking Sensex

Many financial websites will allow investors to track the movements of the Sensex. However, the Bombay Stock Exchange's Sensex page provides greater detail, including an explanation of how companies are chosen for the index and how the index is calculated, up-to-the-minute information about each of the companies in the index and historical data going back to the index's inception.

About the Author

Cam Merritt is a writer and editor specializing in business, personal finance and home design. He has contributed to USA Today, The Des Moines Register and Better Homes and Gardens"publications. Merritt has a journalism degree from Drake University and is pursuing an MBA from the University of Iowa.

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