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The SENSEX is also known as the S&P Bombay Stock Exchange, the Sensitive Index, and the BSE SENSEX. It is a blue-chip stock index that tracks the performance of 30 stocks listed on the Bombay Stock Exchange. It is one of the most widely-used indicators of the strength of the Indian economy and has been running since 1979.
On this page, you’ll find a brief history of the SENSEX, information as to how the stocks it tracks are selected, and explanations of the different ways you can invest in the index.
The base level of the SENSEX was set at 100 index points on 1st April 1979. The index rose steadily from this point, and remained stable throughout the 1990s – avoiding the huge falls seen in other indices during the dotcom crash of the early 2000s. It then rose quickly throughout the first part of the millennium, before falling significantly when the American subprime mortgage crisis caused havoc for global markets in 2007-08.
The early 2000s also saw a new index launched by the SENSEX: the DOLLEX-30. This index tracks the same stocks as the SENSEX, but allows investors to transact in dollars rather than Indian rupees. As of February 2020, the SENSEX’s full market capitalisation was ₹76,112.3149 billion (US$1 trillion), and the index reached its all-time high of 41,945.37 on 17th January 2020. At this point markets started falling sharply around the world due to the COVID-19 pandemic.
The SENSEX is a free-float market-weighted index and tracks only 30 of the most valuable and regularly stranded stocks on the Bombay Stock Exchange. This is the same way that other blue-chip indices, such as the Dow Jones Industrial Average, work in their respective countries. Some of India’s largest companies are tracked by the SENSEX, such as Power Grid Corporation of India, HDFC Bank, and Infosys.
There are many options for investing in indices such as the SENSEX, and one of the most popular is with an instrument called an ETF (exchange-traded fund). ETFs are structured to track the performance of a variety of assets, for example all the stocks in the SENSEX, but can also be traded on exchanges during trading hours – just like an individual stock. This means you can get a diversified investment but also keep trading flexibility, making ETFs an attractive option.
Other investment options include mutual funds or simply buying all the stocks tracked by the SENSEX. With a mutual fund, you’ll also be able to invest in all the stocks in the SENSEX at once, but you can only buy or sell your investment at the beginning or end of each trading day. If you simply buy all 30 stocks tracked by the SENSEX, then you will have more control over decisions like selling just one of them and keeping the rest, but it will take more time and incur significant trading fees.