Indian Capital Market ( BSE SENSEX )

a. History
The Bombay Stock Exchange SENSEX (acronym of Sensitive Index) more commonly referred to as SENSEX or BSE 30 is a free-float market capitalization-weighted index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.

The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. (www.wikipedia.com)
The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology.
Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.(www.tradersedgeindia.com)

b. Recent Performance

In India, inflation in the first three months of 2011 exceeded a central bank forecast. The increase in wholesale prices last month was more than all 28 estimates in a Bloomberg survey, where the median was 8.36 percent. India’s bonds slumped, driving 11-year bonds yields to a two-month high, after the inflation report. The yield on the 8.08 percent note due August 2022, the most-traded government debt, raised four basis points to 8.24 percent at the 5 p.m. close in Mumbai, according to the central bank’s trading system.

Expansion in India’s $1.3 trillion economy has boosted consumer demand and spurred manufacturing, car sales and credit growth, stoking price risks. Central bank Governor Duvvuri Subbarao on March 17 increased the repurchase rate by a quarter points to 6.75 percent. The next monetary-policy announcement is due May 3.


“Inflation remains stubbornly high and above the level expected by policy makers,” Royal Bank of Canada said in a report after yesterday’s wholesale-price release. “The RBI has been among the most proactive of emerging-market central banks in normalizing policy rates over the last 12 months, but this persistence in price pressures suggests that policy makers will need to do more. (http://www.bloomberg.com/news/2011-04-15/overheating-threatens-asia-as-china-india-rate-rises-fail-to-tame-prices.html)