Sensex

What is the Sensex?

The Sensex (S&P BSE Sensex) is the benchmark stock index of the Bombay Stock Exchange (BSE) in India. It tracks 30 of the largest and most actively traded companies listed on the BSE and serves as a bellwether for the Indian economy. The index is float-adjusted and market-capitalization weighted, and its value is published in Indian rupees (INR) and U.S. dollars.

Fast fact: the name “Sensex” is a portmanteau of “sensitive” and “index.”

Key facts

• Launched on January 1, 1986 — the oldest index reflecting India’s markets.
• Comprises 30 large, liquid, well-capitalized companies listed on the BSE.
• Uses a free‑float market capitalization weighting (weights exclude non‑tradable/restricted shares).
• Reviewed semiannually (June and December).
• Operated in association with S&P.
• Mean total market capitalization (as of Dec. 29, 2023): $141.7 billion.
• Top five constituents (as of Dec. 29, 2023): HDFC Bank, Reliance Industries, ICICI Bank, Infosys, Larsen & Toubro.
• 10-year annualized return (to Dec. 29, 2023): 14.52%; 5-year annualized return: 16.28%.

How the Sensex is constructed and maintained

The index is maintained by an index committee (S&P BSE Index Committee) that selects constituents based on objective criteria, including:

• Listing on the BSE (India).
• Large-to-mega market capitalization.
• Adequate liquidity.
• Revenue from core business activities.
• Sector representation broadly aligned with the Indian equity market.

Since September 2003 the Sensex has used a free‑float capitalization method: companies are weighted according to the market value of shares that are freely available for trading (excluding restricted or insider-held shares). This gives greater weight to larger, more freely traded companies while avoiding distortions from shares that cannot be readily sold.

Historical performance and recent trends

The Sensex grew substantially after India’s economic liberalization in 1991. Highlights of its trajectory:

• Early 2000s: around 5,000 points.
• January 2020: nearly 42,000 points.
• 2020 pandemic: fell below 30,000 points.
• 2021: crossed 50,000 points.
• 2022: crossed 60,000 points.
• 2023: crossed 65,000 points.

The index’s long-term rise reflects India’s sustained economic growth, expanding middle class, and rising consumer demand. Projections from several studies suggest continued expansion of the middle-income population, which is a key driver of domestic consumption.

Why investors follow the Sensex

• Broad barometer: It provides a concise view of the health and direction of India’s equity market and economy.
• Investability: As a well-defined, investable index of large, liquid stocks, the Sensex is used as a basis for funds and ETFs that seek Indian equity exposure.
• Diversification: For global investors, it offers exposure to one of the world’s largest and fastest-growing major economies.

Conclusion

The Sensex is a compact, actively managed benchmark representing India’s largest and most liquid public companies. Its free‑float, market‑cap weighting and semiannual reviews help maintain relevance as the Indian market evolves. For investors seeking exposure to India’s economic growth and market cycles, the Sensex remains a primary reference point.