Formula for calculation of index is

All BSE indices (except BSE PSU index) are calculated using following formula:

Free-float market capitalisation of index constituents/ Base Market Capitalisation * Base Index Value

For calculation of BSE PSU index, full market capitalisation of index constituents is considered instead of free-float market capitalisation, as this is the only index at BSE calculated on full-market capitalisation methodology. Dollex-30, Dollex-100 and Dollex-200 are dollar-linked version of SENSEX, BSE-100 and BSE-200 index. For more details click ‘ Dollex series of BSE indices .

Index Closure Algorithm

The closing index value on any trading day is computed taking the weighted average of all the trades of index constituents in the last 30 minutes of trading session. If an index constituent has not traded in the last 30 minutes, the last traded price is taken for computation of the index closure. If an index constituent has not traded at all in a day, then its last day's closing price is taken for computation of index closure. The use of index closure algorithm prevents any intentional manipulation of the closing index value.

Maintenance of BSE Indices

One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that replacement of stocks in Index, additional issue of capital and other corporate announcements like 'rights issue' etc. do not destroy the historical value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values.

The Index Cell of the exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell ensures that all BSE Indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity. The Index Committee of the Exchange comprises of experts on capital markets from all major market segments. They include Academicians, Fund managers from leading Mutual Funds, Finance Journalists, Market Participants, Independent Governing Board members, and Exchange administration.

On - Line Computation of the Index:

During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the BSE Indices every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.

Adjustment for Bonus, Rights and Newly issued Capital:

The arithmetic calculation involved in calculating index is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value despite the non-occurrence of any economic activity of substance. At the Index Cell of the Exchange, the base value is adjusted, which is used to alter market capitalization of the component stocks to arrive at the index value.

The Index Cell of the Exchange keeps a close watch on the events that might affect the index on a regular basis and carries out daily maintenance of all BSE Indices.

•  Adjustments for Rights Issues:

When a company, included in the compilation of the index, issues right shares, the free-float market capitalisation of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalisation.

•  Adjustments for Bonus Issue:

When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change. Therefore, there is no change in the Base Market Capitalisation; only the 'number of shares' in the formula is updated.

•  Other Issues:

Base Market Capitalisation Adjustment is required when new shares are issued by way of conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc.

•  Base Market Capitalisation Adjustment:

The formula for adjusting the Base Market Capitalisation is as follows:

To illustrate, suppose a company issues additional shares, which increases the market capitalisation of the shares of that company by say, Rs.100 crores. The existing Base Market Capitalisation (Old Base Market Capitalisation), say, is Rs.2450 crores and the aggregate market capitalisation of all the shares included in the index before this issue is made is, say Rs.4781 crores. The "New Base Market Capitalisation " will then be:

This figure of 2501.24 will be used as the Base Market Capitalisation for calculating the index number from then onwards till the next base change becomes necessary.