Sensex is a stock market index. A stock index is a snapshot of market movements in real time. A stock index is created by grouping similar types of stocks together. Sensex, which stands for “Stock Exchange Sensitive Index”, is an index of the Bombay Stock Exchange.
Types of Stock Indices:
There are various types of stock indices i. Some of them are:
It shows the overall market and is a comparative measure that shows how much money the average has earned in the market versus how much it should have earned. for example: BSE Sensex, NSE Nifty (Nifty 50).
- Broad market indicator
These are standards with large groups of stocks. For example: BSE 100. The BSE Sensex aggregates the movements of the 30 largest Indian companies with financial strength listed on the BSE. BSE 100 includes the 100 largest companies.
- Market capitalization index
An index where companies are measured by the total market value of their outstanding shares. for example: BSE Smallcap, BSE Midcap.
- Industry or sector index
It provides an overview of the performance of stocks in certain sectors such as healthcare, energy, industrial products, technology, etc. CNX IT, Nifty FMCG Index.
Importance of stock index
Stock indices like Sensex and Nifty give a brief description of the market conditions. They help investors discover market trends. The following reasons explain why the stock index is important for investors:
- It helps you choose the right actions
The stock market has thousands of listed companies, making it difficult and time-consuming to discover the right stock to invest in. Without measurement, it is easy to distinguish stocks. It ranks company stocks by industry type, size, financial impact, and more.
- An important measure for beginners
Investing in stocks can be very risky, especially for beginners. Although learning about the stock market is recommended, it can be a hassle for some people as it takes time. Here, stock market indices like BSE Sensex and NSE Nifty bridge the knowledge gap with simple representation of market trends.
- It reflects investor sentiment
These indices are a summary of the daily sentiments of the investors who trade with them. For example, during times of political change, some stocks begin to underperform, indicating uncertainty or fear about further reforms. Understanding fundamental sentiment shows investors whether the trend is short-term or long-term.
Passive investing is when an investor replicates the stocks of an active index by investing in the same portfolio of securities. It is called passive investing because it is faster, requires less research, and most stocks in the portfolio are bought with one click. A portfolio’s returns should match the returns reflected by the index.
Why Sensex is trending.
After eight consecutive sessions of gains, major benchmarks – Nifty, Bank Nifty and Sensex opened higher in Thursday morning trades. The Sensex opened today at 60,364 and touched a high of 60,423 minutes after the trade opened. It then opened flat and in the red today after major US indices finished lower overnight, leading to mixed trading on Asian benchmarks.
Fears of recession increased after the US FOMC minutes showed the Fed expects a banking crisis to lead to a recession, while fears of inflation caused oil prices to rise to $83 per barrel. After TCS’s results beat expectations on the earnings gauge, Infosys’s earnings to be announced later today will be closely watched.