about share market
This query is : Resolved
31 October 2008
coming to bse and nse how the sensex will be determined (for example sensex is now 9000)
01 November 2008
SENSEX is being calculated on a free-float market capitalization methodology.
01 November 2008
Bombay Stock Exchange (BSE)
Bombay Stock Exchange Sensitive Index has the common name i.e.Sensex. Bombay Stock Exchange comprises of the most actively traded and 30 largest stocks, which are representatives of various stocks in BSE
The most popular and precise barometer of the Indian stock markets is SENSEX. It is being considered as oldest stock market index, which is currently in use.
On April 1, 1979,the base value of the Sensex is 100
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions.
The Bombay Stock Exchange (BSE) authorities review and modify its composition at irregular intervals to make sure as it depicts the current market conditions.
How to calculate BSE SENSEX?
In BSE, Sensex is considered to be an indicator of the stocks. It is necessary to depict whether the graph of stocks are going up or down. Calculation of sensex is made, taking into consideration, stock prices of 30 different BSE Listed companies. It is calculated on the basis of free-float market capitalization method. It is one of the suitable methods for calculating stock market index. The methods to calculate stock market indexes keep on fluctuating from time to time. Sensex needs to be an accurate index so as to depict the BSE stocks properly. It is essential to understand how the sensex is calculated for which it is really necessary to understand the terms ‘free-float market capitalization’ method and ‘market capitalization’ method.
What is "market capitalization"?
Worth of the company in terms of its shares is called market capitalization .If a new investor is looking to buy some of the shares of a particular company, what amount he need to pay for that? That particular amount is known as market capitalization. Current value of share price needs to be multiplied by number of shares issued by the company for the calculation of market capitalization
The company can be either be ‘mid-capitalization’, ‘large-capitalization’ and ‘small- capitalization’ based on the value of market capitalization. This question is asked frequently that how to calculate market capitalization for a particular company.
Calculation of market capitalization can be made only when the concept of ‘free float market cap’ is well understood.
What is "free-float market capitalization"?
Many different types of investors hold the shares of a company! The Govt. may hold some of the shares. The “founders” or “directors” of the company may hold some of the shares. Some of the shares may be held by the FDI’s etc. etc!
Different investors hold the shares of the company. Some of the shares are hold by Govt. Some of the shares are hold by directors or founders of the company .FDI also hold some of the shares.
Open market shares that are free for trading by anyone are called “free-float” shares. Calculation of sensex comes into account, when investors are interested in free float shares. There are certain shares, which are available for trading in open market, but there are some shares, which have, not permit for trade in open market. Any shares that do not fall in these particular criteria can be considered as open market shares
Holdings by founders or directors or acquirers which has control element
Holdings by persons or bodies with "controlling interest"
Government holding as promoter or acquirer
Holdings through the FDI Route
Strategic stakes by private corporate bodies or individuals
Equity held by associate or group companies (cross-holdings)
Equity held by employee welfare trusts
Locked-in shares and shares which would not be sold in the open market in normal course.
Complete report of shareholders along with company’s total shareholdings is to be submitted is to be submitted by the each company to the BSE.On that basis, free float factor is to be decided by BSE.When free float factor is multiplied with market capitalization, it will depict the “free-float market cap” which shows the value of company shares in the open market. In other words, the total costs of buying all the shares in the market is called “free float market cap”. How the value of a sensex can be evaluated at a proper time?
First: Evaluate the “free-float market cap” of all the 30 companies that constitutes the Sensex
Second: Add free-float market capitalizations of all the 30 companies
Third: Make all this relative to the Sensex base. The value you get is the Sensex value!
The “third” step probably confused you. To understand it, you will need to understand “ratios and proportions” from 5th standard mathematics. Think of it this way:
Suppose, for a “free-float market cap” of Rs.100, 000 Cr.
So, the Sensex value will be 6000 if the “free-float market cap” comes to Rs.150, 000 Cr!
Please Note: Every time one of the 30 companies has a “stock split” or a "bonus" etc. appropriate changes are made in the “market cap” calculations.
Now, there is only one question left to be answered, which 30 companies, why those 30 companies, why no other companies?
When the free float company comes to 150,000 cr, the sensex value will be evaluated as 6000.Appropriate changes are made in the market capitalization calculations, when one of the 30 companies has a stock split or a bonus.
There is one question, which arises on frequent basis, need to be answered.
Criteria which need to be kept in mind while selecting the 30 stocks is as follows:
Market capitalization :In BSE, a particular company needs to have market capitalization in the top 100-market capitalization. Market capitalization for each and every company should be more than 0.5% of total market capitalization of the index.
Trading Frequency: A company who is a part of market capitalization needs to be traded on regular basis. There are some exceptions in trading which cannot be avoided. For Example share suspension
Number of Trades: A company should be among the 150 companies, which are listed by average number of trades per day for the last one year.
Industry representation: The companies which are the part of market capitalization, need to be considered as leaders in their respective industries group
Listed history: The companies need to have been listed on BSE for at least one year.
Track Record: The company need to have a excellent track record, as per the opinion of index committee.
After understanding all these concepts, one should know how the sensex is calculated
What is NSE?
BSE is considered to be the oldest stock exchange in the country. This exchange was started about 100 years ago As NSE; it also provides the secondary market
In order to give more emphasis on technology and approaching the nationwide service, NSE was setup in 1995
Investors are offered to trade on companies by both Bombay Stock Exchange (BSE)
And National Stock Exchange (NSE).
BSE and NSE offer investors to trade on companies. Each of these exchanges have their own membership for brokers admission which can help investors in trading which includes buying and selling of stocks. BSE and NSE have their corporate offices in Mumbai.NSE is leading as better stock exchange for the last ten years on the basis of volume and quality trade.
NSE is situated In Mumbai.National Stock Exchange (NSE) is considered to be the first debt market in India. It was established in 1993 and encouraged stock exchange reforms through modernization and competition. Trading process was inaugurated in mid year of 1994.NSE was recognized as stock exchange by the Department of Company Affairs.NSE deals in trade related to treasury bills, government security and bonds issued by public sector companies.
The Organization: The New Stock exchanges are originated on the basis of report of the High Powered Study Group, who promoted the National Stock Exchange (NSE), to provide access to all the investors nationwide on equal basis. National Stock Exchange (NSE) was promoted, by leading Financial Institutes, supervised and controlled by Govt Of India. Unlike other stock exchanges in the country, NSE was incorporated as a tax paying company in Nov-1992.
NSE Group:
India Index Services & Products Ltd. (IISL)
National Securities Clearing Corporation Ltd. (NSCCL)
NSE.IT Ltd.
National Securities Depository Ltd. (NSDL)
DotEx International Limited
SOurce:
http://www.sharesmarket.in/bse-and-nse.php
Bombay Stock Exchange Sensitive Index has the common name i.e.Sensex. Bombay Stock Exchange comprises of the most actively traded and 30 largest stocks, which are representatives of various stocks in BSE
The most popular and precise barometer of the Indian stock markets is SENSEX. It is being considered as oldest stock market index, which is currently in use.
On April 1, 1979,the base value of the Sensex is 100
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions.
The Bombay Stock Exchange (BSE) authorities review and modify its composition at irregular intervals to make sure as it depicts the current market conditions.
How to calculate BSE SENSEX?
In BSE, Sensex is considered to be an indicator of the stocks. It is necessary to depict whether the graph of stocks are going up or down. Calculation of sensex is made, taking into consideration, stock prices of 30 different BSE Listed companies. It is calculated on the basis of free-float market capitalization method. It is one of the suitable methods for calculating stock market index. The methods to calculate stock market indexes keep on fluctuating from time to time. Sensex needs to be an accurate index so as to depict the BSE stocks properly. It is essential to understand how the sensex is calculated for which it is really necessary to understand the terms ‘free-float market capitalization’ method and ‘market capitalization’ method.
What is "market capitalization"?
Worth of the company in terms of its shares is called market capitalization .If a new investor is looking to buy some of the shares of a particular company, what amount he need to pay for that? That particular amount is known as market capitalization. Current value of share price needs to be multiplied by number of shares issued by the company for the calculation of market capitalization
The company can be either be ‘mid-capitalization’, ‘large-capitalization’ and ‘small- capitalization’ based on the value of market capitalization. This question is asked frequently that how to calculate market capitalization for a particular company.
Calculation of market capitalization can be made only when the concept of ‘free float market cap’ is well understood.
What is "free-float market capitalization"?
Many different types of investors hold the shares of a company! The Govt. may hold some of the shares. The “founders” or “directors” of the company may hold some of the shares. Some of the shares may be held by the FDI’s etc. etc!
Different investors hold the shares of the company. Some of the shares are hold by Govt. Some of the shares are hold by directors or founders of the company .FDI also hold some of the shares.
Open market shares that are free for trading by anyone are called “free-float” shares. Calculation of sensex comes into account, when investors are interested in free float shares. There are certain shares, which are available for trading in open market, but there are some shares, which have, not permit for trade in open market. Any shares that do not fall in these particular criteria can be considered as open market shares
Holdings by founders or directors or acquirers which has control element
Holdings by persons or bodies with "controlling interest"
Government holding as promoter or acquirer
Holdings through the FDI Route
Strategic stakes by private corporate bodies or individuals
Equity held by associate or group companies (cross-holdings)
Equity held by employee welfare trusts
Locked-in shares and shares which would not be sold in the open market in normal course.
Complete report of shareholders along with company’s total shareholdings is to be submitted is to be submitted by the each company to the BSE.On that basis, free float factor is to be decided by BSE.When free float factor is multiplied with market capitalization, it will depict the “free-float market cap” which shows the value of company shares in the open market. In other words, the total costs of buying all the shares in the market is called “free float market cap”. How the value of a sensex can be evaluated at a proper time?
First: Evaluate the “free-float market cap” of all the 30 companies that constitutes the Sensex
Second: Add free-float market capitalizations of all the 30 companies
Third: Make all this relative to the Sensex base. The value you get is the Sensex value!
The “third” step probably confused you. To understand it, you will need to understand “ratios and proportions” from 5th standard mathematics. Think of it this way:
Suppose, for a “free-float market cap” of Rs.100, 000 Cr.
So, the Sensex value will be 6000 if the “free-float market cap” comes to Rs.150, 000 Cr!
Please Note: Every time one of the 30 companies has a “stock split” or a "bonus" etc. appropriate changes are made in the “market cap” calculations.
Now, there is only one question left to be answered, which 30 companies, why those 30 companies, why no other companies?
When the free float company comes to 150,000 cr, the sensex value will be evaluated as 6000.Appropriate changes are made in the market capitalization calculations, when one of the 30 companies has a stock split or a bonus.
There is one question, which arises on frequent basis, need to be answered.
Criteria which need to be kept in mind while selecting the 30 stocks is as follows:
Market capitalization :In BSE, a particular company needs to have market capitalization in the top 100-market capitalization. Market capitalization for each and every company should be more than 0.5% of total market capitalization of the index.
Trading Frequency: A company who is a part of market capitalization needs to be traded on regular basis. There are some exceptions in trading which cannot be avoided. For Example share suspension
Number of Trades: A company should be among the 150 companies, which are listed by average number of trades per day for the last one year.
Industry representation: The companies which are the part of market capitalization, need to be considered as leaders in their respective industries group
Listed history: The companies need to have been listed on BSE for at least one year.
Track Record: The company need to have a excellent track record, as per the opinion of index committee.
After understanding all these concepts, one should know how the sensex is calculated
What is NSE?
BSE is considered to be the oldest stock exchange in the country. This exchange was started about 100 years ago As NSE; it also provides the secondary market
In order to give more emphasis on technology and approaching the nationwide service, NSE was setup in 1995
Investors are offered to trade on companies by both Bombay Stock Exchange (BSE)
And National Stock Exchange (NSE).
BSE and NSE offer investors to trade on companies. Each of these exchanges have their own membership for brokers admission which can help investors in trading which includes buying and selling of stocks. BSE and NSE have their corporate offices in Mumbai.NSE is leading as better stock exchange for the last ten years on the basis of volume and quality trade.
NSE is situated In Mumbai.National Stock Exchange (NSE) is considered to be the first debt market in India. It was established in 1993 and encouraged stock exchange reforms through modernization and competition. Trading process was inaugurated in mid year of 1994.NSE was recognized as stock exchange by the Department of Company Affairs.NSE deals in trade related to treasury bills, government security and bonds issued by public sector companies.
The Organization: The New Stock exchanges are originated on the basis of report of the High Powered Study Group, who promoted the National Stock Exchange (NSE), to provide access to all the investors nationwide on equal basis. National Stock Exchange (NSE) was promoted, by leading Financial Institutes, supervised and controlled by Govt Of India. Unlike other stock exchanges in the country, NSE was incorporated as a tax paying company in Nov-1992.
NSE Group:
India Index Services & Products Ltd. (IISL)
National Securities Clearing Corporation Ltd. (NSCCL)
NSE.IT Ltd.
National Securities Depository Ltd. (NSDL)
DotEx International Limited
SOurce:
http://www.sharesmarket.in/bse-and-nse.php
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