BSE Sensex: Wikis

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The Bombay Stock Exchange

BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.

At a regular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.[1].

Initially, the index was calculated based on the ‘full market capitalization’ method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The Market Capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading.

The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor.The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips, etc.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.[2]

Contents

Sensex milestones

Here is a timeline on the rise of the Sensex through Indian stock market history.

  • 1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.
  • 2000, January 15, 1992 - On January 15, 1992, the Sensex crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.
  • 3000, February 29, 1992 - On February 29, 1992, the Sensex surged past the 3000 mark in the wake of the market-friendly Budget announced by Manmohan Singh.
  • 4000, March 30, 1992 - On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.
  • 5000, October 11, 1999 - On October 8, 1999, the Sensex crossed the 5,000-mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.
  • 6000, February 11, 2000 - On February 11, 2000, the information technology boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.
  • 7000, June 21, 2005 - On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the Sensex crossed 7,000 points for the first time.
  • 8000, September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index – the Sensex - crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.
  • 9000, December 9, 2005 - The Sensex on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.
  • 10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10,000-mark on February 7, 2006.
  • 11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the Sensex first closed at over 11,000 points.
  • 12,000, April 20, 2006 - The Sensex on April 20, 2006 crossed 12,000 and touched a peak of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.
  • 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 for the first time. It touched a peak of 13,039.36 and finally closed at 13,024.26.
  • 14000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000.
  • 15,000, July 6, 2007 - The Sensex on July 6, 2007 crossed 15,000 mark.
  • 16,000, September 19, 2007 - The Sensex on September 19, 2007 crossed the 16,000 mark.
  • 17,000, September 26, 2007 - The Sensex on September 26, 2007 crossed the 17,000 mark for the first time.
  • 18,000, October 9, 2007 - The Sensex on October 9, 2007 crossed the 18,000 mark for the first time.
  • 19,000, October 15, 2007 - The Sensex on October 15, 2007 crossed the 19,000 mark for the first time.
  • 20,000, October 29, 2007 - The Sensex on October 29, 2007 crossed the 20,000 mark for the first time.
  • 21,000, Jan 08, 2008 - The Sensex on January 8, 2008 touched all time peak of 21078 before closing at 20873.[3]
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May 2006

On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the Sensex had caused investors to lose Rs 6 lakh crore (US$131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the Sensex managed to move up 700 points, still 450 points in the red.

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006.

  • 13,000, October 30, 2006 - The Sensex on October 30, 2006 crossed 13,000 and still riding high at the Bombay Stock Exchange for the first time. It took 135 days to reach 13,000 from 12,000. And 124 days to reach 13,000 from 12,500. On October 30, 2006 it touched a peak of 13,039.36 & closed at 13,024.26.
  • 14,000, December 5, 2006 - The Sensex on December 5, 2006 crossed 14,000 and touched a peak of 14028 at 9.58AM(IST) while opening for the day December 5, 2006.
  • 15,000, July 6, 2007- The Sensex on July 6, 2007 crossed another milestone and reached a magic figure of 15,000. it took almost 7 month and 1 day to touch such a historic milestone. Coincidentally, Sachin Tendulkar achieved the same mark (15000 runs in international cricket) around the same time. (A refrain at that time was, "Sachin, make runs, so that the Sensex rises too!")

May 2009

On May 18, 2009, the sensex surged 2110.79 points from the previous closing of 12174.42 this leading to the suspension of trade for the whole day.This event created history in Dalal Street, by being the first ever time that trade had been suspended for an increase in value. This rally is primarily due to the victory of the UPA in the 15th General elections

Effects of the Subprime crisis in the U.S

On July 23, 2007, the Sensex touched a new high of 15,733 points. On July 27, 2007 the Sensex witnessed a huge correction because of selling by Foreign Institutional Investors and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE Sensex fell by 615 points in a single day on August 1, 2007.

  • 16,000, September 19, 2007- The Sensex on September 19, 2007 crossed the 16,000 mark and reached a historic peak of 16322 while closing. The bull hits because of the rate cut of 50 bit/s in the discount rate by the Fed chief Ben Bernanke on September 26, 2007 crossed the 17,000 mark for the first time, creating a record for the second fastest 1000 point gain in just 5 trading sessions. It failed however to sustain the momentum and closed below 17000. The Sensex closed above 17000 for the first time on the following day. Reliance group has been the main contributor in this bull run, contributing 256 points. This also helped Mukesh Ambani's net worth to grow to over $50 billion or Rs.2 trillion. It was also during this record bull run that the Sensex for the first time zoomed ahead of the Nikkei of Japan.
  • 18,000, October 9, 2007- The Sensex crossed the 18k mark for the first time on October 9, 2007. The journey from 17k to 18k took just 8 trading sessions which is the third fastest 1000 point rise in the history of the sensex. The sensex closed at 18,280 at the end of day. This 788 point gain on October 9 was the second biggest single day absolute gains.
  • 19,000, October 15, 2007- The Sensex crossed the 19k mark for the first time on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the fastest 1000 points rally ever and also the 640 point rally was the second highest single day rally in absolute terms. This made it a record 3000 point rally in 17 trading sessions overall.

Therefore the US Subprime crisis has a great effect even on INDIA.gold cross the psycological barrier.

Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). Within a minute of opening trade, the Sensex crashed by 1744 points or about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the meantime, that the government was not against FIIs and was not immediately banning PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the Sensex tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued the next day when the Sensex fell 438.41 points to settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.

  • 20,000, October 29, 2007- The Sensex crossed the 20k mark for the first time with a massive 734.5 point gain but closed below the 20k mark. It took 11 days to reach from 19k to 20k. The journey of the last 10,000 points was covered in just 869 sessions as against 7,297 sessions taken to touch the 10,000 mark from 1,000 levels. In 2007 alone, there were six 1,000-point rallies for the Sensex.

January 2008

In the third week of January 2008, the Sensex experienced huge falls along with other markets around the world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the end of the session. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875 points.[4]

Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening or a two day fall of 13.9%.[4]

  • 9,975, October 17, 2008 - Sensex crashes below the psychological 5 figure mark of 10K, following extremely negative global financial indications in US and other countries. Exactly one year back in October 2007, Sensex had gone past the 20K mark.
  • 8701.07, October 24, 2008 lost 10.96% of its value on the intra day trade, the 3rd highest loss for a one day period in its history

Major crashes since 2000

May 2006

On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the Sensex had caused investors to lose Rs 6 lakh crore ($131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the Sensex managed to move up 700 points, still 450 points in the red.

The Sensex eventually recovered from the volatility, and on October 16, 2006, the Sensex closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006.

Effects of the subprime crisis in the U.S.

On July 23, 2007, the Sensex touched a new high of 15,733 points. On July 27, 2007 the Sensex witnessed a huge correction because of selling by Foreign Institutional Investors and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE Sensex fell by 615 points in a single day on August 1, 2007.

Participatory notes issue

On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed curbs on participatory notes which accounted for roughly 50% of FII investment in 2007. SEBI was not happy with P-notes because it was not possible to know who owned the underlying securities, and hedge funds acting through P-notes might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash when the markets opened on the following day (October 17, 2007). Within a minute of opening trade, the Sensex crashed by 1744 points or about 9% of its value - the biggest intra-day fall in Indian stock markets in absolute terms till then. This led to automatic suspension of trade for 1 hour. Finance Minister P. Chidambaram issued clarifications, in the meantime, that the government was not against FIIs and was not immediately banning PNs. After the market opened at 10:55 AM, the index staged a comeback and ended the day at 18715.82, down 336.04 from the last day's close.

This was, however not the end of the volatility. The next day (October 18, 2007), the Sensex tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide continued the next day when the Sensex fell 438.41 points to settle at 17559.98 at the end of the week, after touching the lowest level of that week at 17226.18 during the day.

After detailed clarifications from the SEBI chief M. Damodaran regarding the new rules, the market made a 879-point gain on October 23, thus signalling the end of the PN crisis.

January 2008

In the third week of January 2008, the Sensex experienced huge falls along with other markets around the world. On January 21, 2008, the Sensex saw its highest ever loss of 1,408 points at the end of the session. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE Sensex index went into a free fall. The index hit the lower circuit breaker in barely a minute after the markets opened at 10 AM. Trading was suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from the Finance Minister of India, the market bounced back to close at 16,730 with a loss of 875 points.[4]

Over the course of two days, the BSE Sensex in India dropped from 19,013 on Monday morning to 16,730 by Tuesday evening or a two day fall of 13.9%.[4]

Companies in the Sensex

List of BSE Sensex companies provides the full list of companies that have been part of the BSE Sensex since its inception in 1986 (baselined to 1979).

(as of Feb 26, 2010)[5]

Code Name Sector Adj. Factor Weight in Index(%)

500410

ACC

Housing Related

0.55

0.77

500103

BHEL

Capital Goods

0.35

3.26

532454

Bharti Airtel

Telecom

0.35

3

532868

DLF Universal Limited

Housing related

0.25

1.02

500300

Grasim Industries

Diversified

0.75

1.5

500010

HDFC

Finance

0.90

5.21

500180

HDFC Bank

Finance

0.85

5.03

500182

Hero Honda Motors Ltd.

Transport Equipments

0.50

1.43

500440

Hindalco Industries Ltd.

Metal,Metal Products & Mining

0.7

1.75

500696

Hindustan Lever Limited

FMCG

0.50

2.08

532174

ICICI Bank

Finance

1.00

7.86

500209

Infosys

Information Technology

0.85

10.26

500875

ITC Limited

FMCG

0.70

4.99

532532

Jaiprakash Associates

Housing Related

0.55

1.25

500510

Larsen & Toubro

Capital Goods

0.90

6.85

500520

Mahindra & Mahindra Limited

Transport Equipments

0.75

1.71

532500

Maruti Suzuki

Transport Equipments

0.50

1.71

532541‎

NIIT Technologies

Information Technology

0.15

2.03

532555

NTPC

Power

0.15

2.03

500304‎

NIIT

Information Technology

0.15

2.03

500312

ONGC

Oil & Gas

0.20

3.87

532712

Reliance Communications

Telecom

0.35

0.92

500325

Reliance Industries

Oil & Gas

0.50

12.94

500390

Reliance Infrastructure

Power

0.65

1.19

500112

State Bank of India

Finance

0.45

4.57

500900

Sterlite Industries

Metal, Metal Products, and Mining

0.45

2.39

524715

Sun Pharmaceutical Industries

Healthcare

0.40

1.03

532540

Tata Consultancy Services

Information Technology

0.25

3.61

500570

Tata Motors

Transport Equipments

0.55

1.66

500400

Tata Power

Power

0.70

1.63

500470

Tata Steel

Metal, Metal Products & Mining

0.70

2.88

507685

Wipro

Information Technology

0.20

1.61

  • DLF replaced Dr. Reddy's Lab on November 19, 2007.
  • Jaiprakash Associates Ltd replaced Bajaj Auto Ltd on March 14,2008.
  • Sterlite Industries replaced Ambuja Cements on July 28, 2008.
  • Tata Power Company replaced Cipla Ltd. on July 28, 2008.
  • Sun Pharmaceutical Industries replaced Satyam Computer Services on January 8, 2009
  • Hero Honda Motors Ltd. replaced Ranbaxy on June 29, 2009

Sensex falls

Some major single-day falls of the Sensex have occurred on the following dates [1]:

  1. January 21, 2008 --- 1,408.35 points
  2. Oct 24, 2008---1070.63 points
  3. March 17, 2008 --- 951.03 points
  4. July 6, 2009 --- 870 points
  5. January 22, 2008 --- 857 points
  6. February 11, 2008 --- 833.98 points
  7. May 18, 2006 --- 826 points
  8. October 10, 2008 --- 800.10 points
  9. March 13, 2008 --- 770.63 points
  10. December 17, 2007 --- 769.48 points
  11. January 7, 2009 --- 749.05 points
  12. March 31, 2007 --- 726.85 points
  13. October 6, 2008 --- 724.62 points
  14. October 17, 2007 --- 717.43 points
  15. September 15, 2008 --- 710.00 points
  16. January 18, 2007 --- 687.82 points
  17. November 21, 2007 --- 678.18 points
  18. August 16, 2007 --- 642.70 points
  19. August 17, 2009 --- 626.71 points
  20. June 27, 2008 --- 600.00 points

See also

  • Top 50 companies index on NSE

References

1. For Stock Information Mudraa.com

External links


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