Sensex History

The word Sensex is derived from two words – “Sensitive” and “Index”. It was first coined by Deepak Mohoni who is an Indian stock market expert.  This article is dedicated to Sensex History. Stay tuned!

BSE Sensex Stocks list the top 30 companies listed under it. The market index of each of these is shown by Sensex. Basically, there are two market indexes, Nifty and Sensex.

Too much is talked about the current Sensex data in terms of numbers, percentages, graphs, charts, etc. but very few know its history.

As per the current scenario, the 30 companies listed in this index (Sensex) are among the biggest Indian companies and boast the most “actively traded stocks”.

Sensex History Data

The Sensex started in the 1990s and ever since its commencement, it has witnessed rapid growth. This remarkable growth has been paced up after the year 2000 to be more specific. 

It was in the year 2002 that the Sensex index crossed the “6000 marks” for the very first time. This was mainly because of the IT companies and since then, the Sensex has grown progressively. 

Also, on 2nd April 2019, the Sensex closed at 39,056.65 (crossing 39,000 points for the 1st time).

The rapid increase in India’s GDP (Gross Domestic Product ) is highly responsible for this growth.

If you are wondering why only 30 companies and why particularly these were chosen, you need to know that the “S&P BSE Index Committee” selected them based on these major criteria:

• The companies must consist of large/mega-cap stocks
• They should be relatively liquid
• The company must generate its earnings from core activities
• The companies must contribute to keep the sector balanced (with India’s equity market)

Some popular companies under this Index include – Axis Bank, ICICI Bank, IndusInd Bank, Asian Paints, Bajaj Finance, Bharti Airtel, Hindustan Unilever, Coal India, HCL Technologies, Tata Consultancy Services, Larsen &Toubro, etc.

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Sensex Index

The composition of the Sensex shares is modified by BSE regularly. This ensures that this data is readily available because it impacts/reflects the current stock market conditions. 

The traditional method of calculating the Sensex index was the “weighted methodology of market capitalization”. However, this method was amended in the year 2003 and since then, the “free-float capitalization method” is followed.

In the free-float method, the number of the company’s available shares for sale is used to calculate the index instead of its outstanding shares.

Also, this method does not include the following – stocks that are not for sale, restricted stocks, and stocks held by the Sensex insiders/employees.

As per the “free-float capitalization method”, the index level shows the “free-float value” of the 30 companies listed under Sensex. 

The free-float capitalization is therefore calculated by the following formula:

• The company’s market capitalization (its outstanding shares x share price) X  The free-float factor

Note that the “free-float factor” is the ratio of floated shares to outstanding shares.

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Sensex Crisis

In Sensex history, the market crash of 2008 is still recalled with anxiety and the tough circumstances it created for the world economy between 2008 and 2009.

The fall in the Dow Jones industrial average in its intraday trading led to a stock market crash in India as well. 

This crash not only affected the Indian stock market adversely but also caused a loss of 1408 points (on 21st January 2008).

On the next day of this loss, trading was suspended for an hour as the index went into a downward spiral.

From January to November (in 2008), the index kept on dropping which caused a prolonged uncertainty in the entire market.

In the same year, in October, the stock market closed at 8509.56 points which were the lowest in the last 10 years.

The year 2009 did no good to the already critical market because of the Satyam Fraud.

This unfortunate event caused the index to drop by almost 750 points which worsened the conditions even more and threw the market into turmoil.

The best way to describe the history of BSE Sensex is a roller coaster ride.

It has had its share of ups and downs but despite all fluctuations and plunges in the past years, the BSE Sensex still upholds its position as India’s leading “stock index”. 

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Major Events In Sensex History

Last year (2019) on 1st April, the BSE Sensex climbed 39,000 points for the first time in Sensex history. Moreover, India’s oldest stock market index (BSE Sensex) completed 40 years on the same date (April 1). 

But wait, wasn’t Sensex launched in 1986?

Sure it was but on 1st April 1979 is considered as the base year because the index was set at 100 on that day.

There are many more great and not so good events in Sensex History. The following table illustrates the milestones of Sensex from 1990 to 2019:

 

 

As mentioned before, the BSE Sensex completed 40 years in April 2019. Not only is it India’s first real-time index but it also represents the country’s stock markets in the public imagination to date.40 Years Of BSE Sensex

BSE Sensex works like a barometer for portraying India’s growth and economic changes.

Industries like – information technology, financial services, consumer discretionary, healthcare, and energy have been an important component of the Sensex since the early 2000s.

Over the last 40 years, BSE Sensex has turned out as an essential measure of the economic health of the Indian stock market.

Its progressive rise and certain milestones in this 40-year tenure of Sensex history there is a clear indicator of the evolution of the Indian economy. 

The simplest to describe the 40-year journey of Sensex is that it went from 100 points to about 39,000 points. But this does not mean that everything went on smoothly.

BSE Sensex saw some periods of speedy growth while at other times, things were not as pleasant. 

It took 11 years for the Sensex to cross the 1,000 marks. Once this 1000 mark milestone was hit, there was no looking back and it crossed the next 3,000 points in less than a year. 

If still confused about timings, then read the Stock Market Timings.

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Conclusion

Sensex is an indicator of the movements in the Indian stock market. A rise in it indicates that the stocks have gone up for that particular period. 

Sensex history has shown considerable growth since its establishment in 1996.

However, the ride was never smooth. The investors who have survived the crisis namely – the market crash of 2008 will agree that surviving another day was the only way to make money from stock markets. 

Undoubtedly the market crash of 2008 was a global financial crisis and made things rough for the Indian stock market as well. But during the following 5 years i.e. 2008-2013, the Sensex went up by 150% boasting a CAGR of 20%. 

The ones who pulled their money out during this period and chose to “stay safe” clearly missed the opportunity. Therefore, it is essential to understand the volatile nature of the market. The market can appreciate any time as economic cycles turn. 

If put simply, the nature of Sensex depends on the circumstances and economy prevailing in the country.

As per the Sensex History, it has been proved that the Sensex goes up when the overall circumstances in India are sober. The same tends to fall when the circumstances are unfavourable (the current COVID-19 situation, for instance). 

The rise or fall in the BSE Sensex represents both – India’s victories and struggles. You must, therefore, monitor its nature and history to benefit from the upturns (as and when they happen).

We hope that this helped. Happy trading!

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