The Bombay Stock Exchange is undoubtedly India's most famous stock exchange. It was founded in 1986 and is headquartered in the financial capital of India, Mumbai. As of January 2023, approximately 5,311 companies listed their stocks on the exchange. The number is likely to increase in the years to come. You can invest in any suitable stock and make good profits.
When referring to BSE, you notice that most individuals, be it fellow investors, financial professionals, and experts, mention Sensex. It is the benchmark indicator of BSE. It covers the most active and liquid stocks of the exchange. The top 30 performing stocks construct this market index. You learn about various stocks and the present value of the market index on Sensex today live. The following are the core objectives of Sensex:
Measure market movement
As mentioned, approximately 5,311 stocks are listed on the BSE. Gauging the market positioning by considering the performance of every stock would be tedious and time-consuming. Hence, the concept of the market index was introduced. The market index is a hypothetical portfolio representing a particular financial market segment. Referring to it provides a fair understanding of the market's positioning.
If the Sensex value is high, the stock exchange performs well, and vice versa. Referring to it lets you measure market movements and make suitable decisions.
Acts as a benchmark
Sensex is the benchmark index for BSE. It includes the top 30 performing stocks. These belong to reputable companies having a large market capitalisation. Their performance is considered the best in the market. It works like the cream layer of the market. Sensex sets the tone of the entire market. Almost all companies strive to achieve performance like that of Sensex stocks. Note the Sensex index composition changes often.
The performance of all included companies gets reviewed. If a few companies do not perform well, they are removed and replaced by new ones. For instance, if X company is included in the market index. After six months, the market index is reviewed, and say it does not perform, then a better-performing company like Adani Power share price can replace it.
Index based instruments
You can invest in Sensex as a direct and indirect investment. In direct investment, you directly invest in stocks included in the market index. In indirect investment, several instruments exist, like Index Mutual Funds, Exchange-Traded Funds, and Derivatives. These instruments have Sensex as their underlying asset. Hence, they replicate the performance and involve the same risk as Sensex.
Investing in index-based instruments earns you decent returns and mitigates the associated risk. Consider the Senex today live value before investing. The better the Sensex index performs, the better your returns will be, and vice-versa.
