How to Calculate Sensex

BSE Sensex, also known as Sensitive Index, is a stock market gauge in India that consists of 30 different stocks over a broad range of industries. To calculate Sensex you must use the Free Float Market Capitalization method. Free float shares are shares available for trade on the open market. In order to calculate Sensex, you must first understand how to calculate the Free Float Market Capitalization of each Sensex company. Follow the steps below to get started.

Instructions

Calculating Free Float Market Cap of a Company

1. Determine the market capitalization for a company, which is the number of outstanding shares multiplied by the market value of one share.

2. Divide the number of shares readily available for trade on the market by the total number of shares outstanding. This should give you a percentage of shares that are free float.

3. Round the free float factor up to the closest multiple of five to determine the category band for that company. For example, if a company has a free float factor of 0.32 (or 32%), round that up to 0.40, making the free factor band for that company ">35 - 40%." The range is so that frequent minor changes of a company's free float rarely alter its categorization.

4. Multiply the market capitalization of the company (determined in Step 1) by the free float factor. The result is the company's Free Float Market Cap.

Calculating the Sensex

1. Find the index divisor by dividing the previous day's Free Float Marketing Cap by the previous day's Sensex Value. For example, if yesterday's Free Float Market Cap was 340,000 and yesterday's Sensex Value was 17,000, then the index divisor is 20.

2. Add together the individual Free Float Market Cap for all 30 Sensex companies to determine today's total Free Float Market Cap.

3. Divide today's total Free Float Market Cap by the index divisor determined in Section 2, Step 1. The resulting number is the current Sensex value. For example, divide today's Free Float Market Cap of 360,000 by the index divisor of 20 and you will get a Sensex Value of 18,000.

References

• Last Bull: Actual Sensex Calculation -- Free Float Market Capitalization
• Xomba: How to Calculate BSE Sensex

Resources

• Learn to Calculate Market Capitalization