Posted on June 4, 2024

S&P BSE Sensex also called as the Indian Sensex is one of the well-known stock indices in India. It was developed in 1986 and it is the key indicator of the Bombay Stock Exchange (BSE) that being amongst the oldest stock exchanges in Asia. Basically, Sensex has enormous importance as stock market index, as it is always considered to be an indicator of the condition of Indian economy and market sentiments.

What is the Sensex?

The Sensex therefore is an indicator made up of thirty companies listed in the BSE and featuring some of the most volatile stocks. For this purpose 30 companies has been chosen as representatives of financial sector, IT business, energy sector, consumer goods sector and other fields. The following large companies have been selected for the purpose of analysis based on size, velocity of stocks and an industry type:

Importance of the Sensex

The Sensex is crucial for several reasons:

Economic Indicator: A move of Sensex depends on many factors like the health of the Indian economy, etc. It is an index that tracks the Bombay Stock Exchange through 30 well established companies and when the Sensex goes up it brings confidence among the investors and economic growth. On the same note, a declining Sensex has the possibilities of portraying an unfolding negative phenomenon on the Indian economy or dwindling optimism among investors.

Investor Sentiment: First of all, it is useful to illustrate how news affects the Sensex and this will help in arriving at a general idea about the investors’ sentiments. A bullish Sensex which is formed by positive traditional technical analysis implies that the investors are enthused to buy in the market, while bearish Sensex means that the investors are either wary or apprehensive about the market.

Investment Benchmark: Sensex is another important benchmark index which is used by most of the mutual funds and portfolio managers to compare the investment portfolio with it. Using the sensex to compare a fund’s performance gives investors the ability to measure the efficiency of the utilized investment strategies.

Historical Performance

Yet, over the years, it has evolved widely meaning and continues to be characterized by various fluctuations. Gold declined from $325 per ounce in January 1990 to $255 in October 1999, Crossed the 1,000 mark for the first time in the year 1990 reached the 10,000 mark in the year 2006 and crossed the 50,000 mark for the first time in early 2021. This has been due to the increased economic liberalization in India and the investment portfolio of investors moving into the stock exchange.

However, Sensex is also not unblemished and there are times when it plunged down largely because of the world economic meltdown, any problem in the domestic economy or political unrest. For example, the global financial crisis of 2008 that affected almost all the world economies resulted in decrease of Sensex but the situation came back to normality in the next years as the total financial systems of these countries stabilized.

Factors Influencing the Sensex

Several factors can influence the performance of the Sensex: Several factors can influence the performance of the Sensex:

Economic Data: Some factors such as the GDP, inflation rate and employment, empowered determine the investor’s feeling of the market and results.

Corporate Earnings: The stock market of BSE can also be indicate by the changes in the ?=index of the Sensex In this case; the financial position of the companies that form the Sensex can impact on the index. The Sensex can rise strongly to new highs in reaction to good earnings, and it can slide lower on weak earnings.

Global Markets: capabilities In the same way, Business capability can be affected by the performance of global stock markets mainly the and States and European stock markets. Various internal and external factors like – All these external factors have contributions from the global inclination of the overall economic systems as well as different geopolitical incidents.

Government Policies: Extraordinary events, fluctuations in fiscal and monetary policies, new/different regulations and government activity can also influence the stock market. Relaxation in business regulations and other liberisation measures within a country normally boost the Sensex.

Investing in the Sensex

There are several ways in which one can indirectly invest in the Sensex as a whole; some of these are as follows: By directly purchasing the stocks of the companies in the Sensex; By making investments in mutual funds and Exchange traded funds (ETFs) that are incorporated from the Sensex. For the individual investors, mutual funds and Exchange traded funds (ETFs) are quite safe and act as good investment instruments in order to invest in the Sensex stocks performance.

Conclusion

The BSE Sensex is among the most important of the several stock market indices existing in India and is an effective benchmark for the general wellbeing of the country’s economy. Just as it’s important to understand what the Sensex represents, and how it is computed, it is equally important to be aware of the factors that can affect the outcome. With this, one can identify the performance of the Indian market and how well it stands in the future either you are new in investing or you already familiar with it.

Categories: Business and Economy

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