Adani Ports enters Sensex

Adani Ports and Special Economic Zone Ltd (APSEZ) will become the first company of the Adani Group to be included in the Bombay Stock Exchange’s Sensex. APSEZ will replace Wipro in the Sensex. APSEZ and Adani Enterprises, the flagship of the Adani Group, are already part of the Nifty on the National Stock Exchange.

‘Sensex’ in BSE

• SENSEX stands for ‘Stock Exchange Sensitive Index’ and is the benchmark index of the Bombay Stock Exchange in India. The term was coined by stock market expert Deepak Mohini.
• BSE 30: It represents a group of 30 stocks representing the country’s largest, financially strong companies in key sectors of the Indian economy, which are listed on BSE Ltd.
• Sensex is traded internationally on EUREX as well as on major exchanges of BRICS countries (Brazil, Russia, China and South Africa).
• Examples: Reliance Industries, ICICI Bank and ITC Ltd, Axis Bank, Asian Paints, Bajaj Finance, Bharti Airtel, Coal India, HCL Technologies, Hindustan Unilever, Tata Consultancy Services, Larsen & Toubro, etc.
• Origin: Sensex is the oldest and most tracked index of the country, launched in the year 1986.
• It is the oldest index of India and provides periodic series data from the year 1979.
• Market Capitalisation: As of May 24, 2024, the total market capitalisation of BSE-listed firms or the total value of all listed stocks was Rs 419.99 lakh crore.

Calculation Method: Sensex is calculated based on the ‘Free-Float Market Capitalization’ method, the formula of which is

NSE Nifty

• Nifty 50 was introduced in November 1995.
• It is a broader based index than Sensex and includes 50 blue chip large and liquid stocks traded on NSE.
• This index represents a portfolio of India’s top companies, which accounts for about 65% of the float-adjusted market capitalization of NSE.
• It includes companies like Adani Enterprises, Bajaj Finance and Coal India.
• As of May 24, 2024, the market capitalization of NSE firms was Rs 416.04 lakh crore.

Free Float Market Capitalization

• The free-float method is a method of calculating the market capitalization of the underlying companies of a stock market index.
• With the free-float method, market capitalization is calculated by taking the price of the equity and multiplying it by the number of shares readily available in the market.
• Instead of using all shares (both active and inactive shares) as in the full-market capitalization method, the free-float method excludes locked-in shares, such as those held by insiders, promoters and governments.

Criteria for selection in stock indices

• Stock indices are reconstituted twice every year in June and December.
• The companies selected must have a listing history of at least six months on the BSE/NSE and must have traded on every trading day during this six-month reference period.
• To be eligible, the stock must have a derivative contract, i.e. an agreement between two parties to buy or sell a security at a specified price in the future.
• A derivative is a financial instrument whose value is based on the value of an underlying asset such as an equity or currency.
• For BSE, the company must be among the top 75 companies based on its average three-month float or total market cap.
• It must have a minimum free-float market cap of 0.50% after meeting market cap and liquidity criteria.
• In terms of liquidity, the cumulative weighting of three-month average daily traded value is calculated for companies that meet the eligibility requirements.
• The ‘Nifty 50’ index is a free float market capitalisation-weighted index.
• NSE As per the requirements, the shares of the organization must have 100% trading volume in the last 6 months to qualify with respect to liquidity.
• 90% of the observations for a basket size of Rs 100 million should have traded at an average effective cost of 0.50% or less during the last six months.