Indian stock market conditions are reflected in the Sensex India index.
The calculation of BSE Sensex involves dividing the free float market capitalization
of 30 companies in the Index by a number called the Index Divisor. The Divisor is
the only link to the original base period value of the BSE Sensex. It keeps the
Sensex India Index comparable over time and is the adjustment point for all Index
adjustments arising out of corporate actions, replacement of scripts, etc. During
market hours, prices of the index scripts, at which latest trades are executed,
are used by the trading system to calculate the BSE Sensex on a continuous basis
using the free-float methodology. Restricted Indian are excluded; only shares readily
available for trading are calculated.
Free float methodology was adopted with effect from September 1, 2003. Initially,
‘full market capitalization’ method was used to calculate the BSE sensex. Free float
refers to readily available shares for online
trading. A listed company in the BSE, in the process, is assigned a weight
for the calculation. The free float index reflects the market trends more rationally
besides being useful for performance measurement of companies.