Sharekhan Blog

All you need to know about Sensex Index Live

  • Jul 28, 2023

So, what is this SENSEX, though, and how can anyone invest in it? All the information you want about the SENSEX is provided here, along with instructions on how to invest in it using a type of mutual fund that is both affordable and efficient.

A market index made up of 30 firms is called SENSEX.

Sensitivity and Index combine to form the term SENSEX. SENSEX, often known as BSE 30, is a market index made up of 30 well-known businesses that are stable, financially solid, and performing well. As you'll see, this index includes some of the most well-known brands and businesses in India. This is because every firm that wants to be considered for addition to SENSEX must meet 5 essential requirements.

How are the members of the SENSEX chosen?

Due diligence is performed on every stock before it is added to the SENSEX, ensuring that only high-quality stocks are included in this index. In actuality, organizations must meet the following 5 requirements to be taken into consideration for inclusion in SENSEX.

Must be on the Bombay Stock Exchange (BSE) - A firm cannot be a member of the S&P/SENSEX Index live if it is not registered on the BSE.

Must be huge or medium-sized. Firm - To be eligible for inclusion in the SENSEX, the organization must have a large-to-midsize market capitalization. Only the finest and largest firms are included in this ranking due to these criteria.

Shares should be very liquid. Stock must be liquid to be evaluated for inclusion in the SENSEX. It implies that buying and selling that specific stock should be simple. Since the strength of the underlying fundamentals influences this liquidity, it also serves as a screening criterion.

Substantial Money should come from the company's primary business operations. The company should produce a sizable amount of revenue from these operations. Depending on the type of business the firm is in, many companies have been divided into several sectors based on their primary activity. For instance, Sun Pharma is a pharma firm, while Bharti Airtel is indeed a telecommunications corporation.

The company's sector weight—or, more specifically, the sector's balancing—is still another crucial factor. Each sector of the economy is assigned a weight for any given index, which serves as a representation of the economy. For instance, financial services are given the most weight in NIFTY and other indices. Therefore, it is crucial for every firm, whether it is currently a component of the SENSEX or has been listed, to preserve the stability of the area to which it belongs. Each component of the SENSEX now has a separate weighting. So according to free-float market capitalization, this weight is chosen.

How does one participate in SENSEX?

You can see that the SENSEX includes the best firms in India, and if you purchase the SENSEX, you automatically own a portion of these incredible businesses. You now have two options for investing in the SENSEX.

Purchase equities instantly in the same proportion as the SENSEX weighting.

You may start making investments right away in the SENSEX components and the weights such companies have in that specific index. This indicates that you can immediately purchase equities in a number equal to their weight.

Invest in mutual fund indexes.

Index mutual funds are a better choice if you want to invest in the SENSEX. These funds perfectly mimic the index, having a portfolio that is identical to the index. In a SENSEX index fund, the 30 stocks will thus be distributed in the same ratio as the SENSEX.

In conclusion:

The world's most successful investor, Mr. Warren Buffett, also suggests using index mutual funds. For the majority of investors, index funds, he previously claimed, are the most rational investing alternatives. As a result of investing in the largest firms in the nation, these funds have a very low-risk factor and will thus assist you in reaching your financial objectives.



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