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Sensex is the combined value of stocks of 30 selected companies that are listed on the Bombay stock exchange (BSE). These stocks are the most actively traded stocks, along with representing some of the largest corporations. BSE can revise this list of 30 stocks over time.

•Should be listed on BSE

•The stock has to be large or mega-cap. Large cap includes companies with market capitalization between Rs. 7000-20,000 crore. Mega cap includes companies with a market capitalization above Rs. 20,000 crore.

•Relatively liquid stocks are selected

•Revenue of the company should come from its core activities

•The company should have a diversified and well-balanced sector focus in parallel to the Indian equity market

How is Sensex Calculated?

Sensex is calculated by using:

“FREE FLOW MARKET CAPATILAZITION”

where instead of a company’s outstanding shares, the number of shares available for sale under it is used to calculate the index. This method, thus, does not integrate restricted stocks (ones held by company insiders) which are not for sale.

The formula for the same isFree Float Market Capitalization = Market Capitalization x Free Float Factor

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