Significance of Sensex for Investors in 2024

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Significance of Sensex for Investors in 2024

Stock Exchange Sensitive Index (SENSEX) also commonly called the Bombay Stock Exchange tracks the performance of the best 30 biggest and largest traded firms. It operates on a free-floating basis and is weighted according to the performance of the economy.

If you are new to the stock market, this blog is for you as it talks about the Sensex as a structure and discusses its significance. Read on to learn more.

 

What is Sensex?

The word Sensex was coined by an expert stock market analyst Deepak Mohini. Sensex represents the prominent market index comprising the top 30 companies listed on the Bombay Stock Exchange (BSE).  You can study the performance of these companies on Tradingview live with the Sensex chart as shown below:

The selection of companies is determined by the S&P Bombay Stock Exchange (BSE) Index Committee. The 5 main criteria are:

1. To be on the Sensex, the company must be registered with the Bombay Stock Exchange.

2. Only those companies that have large-cap and mega-cap stocks can be a part of Sensex.

3. Companies must demonstrate relative liquidity in their trading practices.

4. The company must earn revenue from its core activities.

5. Consideration is given to companies that contribute to maintaining sector balance within the country’s equity market.

   Significance of Sensex of Investors In 2024

Here are 3 main points of significance for all those who wish to start their journey as a stock market investor.

Comprehensive Picture of the Market

For a comprehensive understanding of the market, the Sensex acts as the best barometer. The broad representation of the companies across various sectors gives a bird's eye view of the financial sector.

Comparing and contrasting stocks is relatively easy when investing. This also enables a person to trace the direction the economy is headed in and reflects the overall health of the financial world.

Easy to Study Economic Trends

Whether you are a long-term or a short-term investor, consistent tracking of trends is easy and convenient on Sensex. The availability of real-time data and technical indicators enables an investor to identify patterns and predict possible fluctuations.

Proactive decision-making gets easier in serious situations. Moreover, making informed decisions reduces the risks because studying trends becomes easier.

Provides Diversification

Sensex includes companies across different sectors. The composition gives investors the satisfaction of mind as there are multiple options available. This also results in a reduction in specific risks associated with single sector-specific stocks.

Diversification also counters portfolio volatility and enhances risk adjustment returns for investors. This creates a resilient and stable investment portfolio.

Conclusion

Since its inception in the 1990s, the Sensex has witnessed significant growth. However, the index is trading above Rs. 73000 at present which adds to the investors’ wealth.  To begin your journey as an investor in the share market, go to the Dhan website now or download the app. It is one of the leading online trading and investing platforms in India that gives you access to a wide range of tools and indicators.

 

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