SENSEX Full Form: How It Works?

In the year 1989, Deepak Mohoni, a stock market analyst coined the term ‘SENSEX’ as a portmanteau of ‘Sensitive’ and ‘Index’. At the time, BSE Sensitive Index was at 750 points.

SENSEX is an index that measures the average of prices of 30 top stocks that are listed in Bombay Stock Exchange. This stock market index was first published on 1st January 1986.

Let us start with the SENSEX full form and proceed further with understanding the details of this index.

Table of Contents

• SENSEX Full Form
• Understanding SENSEX
• How does SENSEX work?
• Calculation of SENSEX

SENSEX Full Form

SENSEX full form is Stock Exchange Sensitive Index. Let us understand SENSEX with a day-to-day example. Suppose a class of 30 students is taking a math test. Once the test is over, the principal wants to know how class performed on the test. In this case, instead of mentioning the performance of every student, teacher will mention the average score of the class. This is the summary of the test performance. 

Similarly, SENSEX is the summary of stock market performance. Here, instead of 30 students, 30 stocks are listed. Instead of the average class score, SENSEX represents the average value of the listed stocks. 

Understanding SENSEX

Now, let us understand SENSEX in technical terms.

SENSEX is a numerical indicator that shows the progress of the financial market in a day. It is updated in real-time based on the latest prices of listed stocks during market hours (09:15 am to 3:30 pm from Monday-Friday).

SENSEX is also known as S&P BSE SENSEX where S&P stands for “Standard & Poor’s”. Standard & Poor’s is an American financial services company that maintains SENSEX in partnership with BSE.

Also known as ‘BSE 30’, it is the index of 30 companies that are listed on BSE (Bombay Stock Exchange). These companies are selected based on their size and the frequency on which their stocks are traded. All the listed companies have the most actively traded stocks.  

These companies are not constant as they get replaced by companies with better performance. The decision to keep a company listed within the SENSEX is based on the periodic review of companies’ market performance. The review occurs randomly. However, the companies included in SENSEX is a decision made by the Bombay Stock Exchange (BSE).  

This means, if any company has been listed on SENSEX for several years, it is a very successful company. It also means that it is safe to start investing in such a company. As of 2022, there are 7 companies that have been consistently listed in SENSEX. These include HUL, Tata, L&T, ITC Limited, Reliance Industries Ltd, Mahindra & Mahindra Ltd, Tata Steel Ltd and Nestle Ltd. 

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