How is SENSEX calculated?

BSE (Bombay Stock Exchange) launched Sensex in 1986. It measures the stock price fluctuations of 30 large companies in terms market value, turnover, profit, etc. Every minute, the Sensex's value is calculated. The Sensex's movement indicates that most BSE companies are increasing in stock prices. Conversely, a falling Sensex means that most BSE companies have a declining share price. 1978-1979 is the base year for the Sensex, and 100 was the base index value.

How Sensex calculated using Example

Let's say that there are two companies X and Y which are listed on BSE. Sensex currently stands at 30,000 points. Let's say that 1 share of X is worth Rs.
200 shares, with a total outstanding of 10000. The value of one share of 'Y is Rs. 500, and it has a total outstanding share of 7500. The total capitalization is therefore:

(200 x 10000+(500x7500) = Rs. 57.50 Lacs

Let's say that the share price for X company rises by 25% (220 + 25% of 200), which is 250. Then, the price for Y company's shares drops to 10% (50%-100% of 500s), which is 450. At these new share prices, the BSE total market capitalization will now be:

(250x10000 + (450x7500) = Rs. 58.75 Lacs

This means that the total market capitalization has increased from Rs. 58.75 to Rs. 58.75. 57.50 Lacs, which represents a 2.17% rise in the BSE's market capitalization.

This price increase will result in the Sensex reaching 30651, which will be 2.17% more than 30000.