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Definition
The Sensex (full name: S&P BSE Sensex) is the flagship benchmark index of BSE Ltd (formerly Bombay Stock Exchange), India's oldest stock exchange (est. 1875). It comprises 30 blue-chip stocks selected on the basis of free-float market capitalisation, financial soundness, liquidity and sector representation. The base year is 1978–79 with a base value of 100. As of 2024, the index reflects approximately 47% of BSE's free-float market cap. The index is co-branded with S&P Global following a 2012 licensing agreement. Source: BSE — Sensex Index Methodology.
How It Is Calculated
Sensex uses the free-float market-cap weighted methodology, identical in principle to Nifty 50:
- Free-float market cap = Price × Shares × IWF (Investible Weight Factor). IWF strips out promoter, government-strategic and cross-held shares.
- Index formula: Sensex = (∑ Free-float market cap of 30 constituents) ÷ Base Market Cap × 100.
- Selection criteria: Listed on BSE; must be traded on at least 75% of trading days; positive average daily trading value over 1 year; adequate representation of the Indian economy across sectors.
- Rebalancing: Conducted by the BSE Index Committee; no fixed schedule — changes are made on merit and announced in advance.
The 30-stock pool makes Sensex more concentrated than Nifty 50. The correlation between Sensex and Nifty 50 daily returns exceeds 0.99 — for practical purposes they move in lockstep; the difference is aesthetic/institutional.
Market Mechanics
- Sensex derivatives: BSE offers Sensex futures and options but volumes are a fraction of the Nifty 50 equivalent on NSE. Lot size: 10 units (post-2024 SEBI revision).
- Settlement: Cash-settled; final settlement at closing Sensex value on expiry Thursday.
- BSE Sensex ETFs: Multiple ETFs (e.g., SBI ETF Sensex, HDFC Sensex ETF) track the index passively with TER below 0.10%.
- SENSEX 50 and derivative indices: BSE also publishes Sensex Next 50, BSE 100, BSE 200, BSE 500, BSE SmallCap, and sector indices — all using the same free-float methodology.
Risk Profile
Because Sensex and Nifty 50 move near-identically, risk characteristics are shared: large-cap concentration, financials-heavy (~38%), sensitivity to FII flows, and macro/currency risk for NRI investors. Historical peak-to-trough drawdowns mirror Nifty 50 closely. One structural difference: Sensex's smaller constituency (30 stocks) means idiosyncratic single-stock shocks can move the index more — e.g., a large Tata or Reliance event has marginally greater index impact on Sensex than on Nifty 50. For derivatives, BSE Sensex contracts typically have lower liquidity than NSE Nifty — wider bid-ask spreads increase implicit transaction costs for options traders.
Worked Example
An NRI investor tracks portfolio performance against Sensex TRI (total return including dividends). Over FY2015–FY2024 (9 years), Sensex TRI delivered approximately 14% CAGR in INR terms. In USD terms (adjusting for INR depreciation of ~3.5% p.a. against USD over the same period), the return was approximately 10.5% CAGR — a material difference illustrating currency risk for investors repatriating USD. A ₹10 lakh investment in a Sensex TRI fund in April 2015 would be worth approximately ₹32.2 lakh by March 2024 (price return ~13% CAGR, dividend yield adds ~1.5%).
Caveats
- Sensex and Nifty 50 are often used interchangeably in media. They are different indices on different exchanges but are functionally similar benchmarks.
- Always compare mutual fund returns against the TRI variant, not the price-return index — SEBI mandated TRI benchmarking for all equity funds from February 2018.
- The Sensex's 30-stock portfolio has a long history of reconstitution; stocks removed have historically underperformed post-exit — passive exposure captures the reconstitution benefit, active stock-picking does not automatically.
See Also
Primary Source
BSE — S&P BSE Sensex Index Methodology
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