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We have two major stock exchanges in India. They are NSE (National Stock Exchange)
and BSE (Bombay Stock Exchange). I would like to share calculation of NSE and BSE
indexes from this article. Because they are the main indicators to the investors, stock
market analyst etc., The tools (MACD, ROC, PIVOT POINT, EMA) which are used to
calculate or predict stock market movements. They are also requiring index values of
NSE or BSE.
Bombay Stock Exchange (BSE) is an oldest stock exchange in Asia. It was started in 1875
as The Negative Share and Stock Brokers Association. There is a story behind to BSE i:
e, since 1850s Four Gujarati and One Parsi or parsee (which indicates Parsis derived
from a group of Persian Zoroastrians who came to India during 10th century
AD) stockbrokers have met in Town Hall of Mumbai. This is an informal meeting among
them. Time gone, no of brokers were increased then they would like to convert this
meeting as a formal one. So they had found a place in 1874 at DALAL STREET and they
made their office in DS. It is become an official organisation in 1875, called The
Negative Share and Stock Brokers Association. BSE was acknowledged by Indian
government in 1956 under Securities Contracts Regulation Act (SCRA). An electronic
trading system was introduced by BSE in 1995 i: e, BOLT (BSE On line Trading) which
has a capacity to make 8 million orders per day. Base value of SENSEX is 100 and base
year is 1978 1979. The calculation of BSE was started from 1986. Earlier it was
calculated by using total market capitalisation. Since 2003, it was calculated by using
free float market capitalisation. SENSEX is calculated for every 15 seconds.
Besides, BSE has listed more than 5033 companies. BSE is the first exchange in India to
receive ISO 9001: 2000 certification. It is also the first Exchange in India and second in
the world to receive Information Security Management System Standard BS 7799-2-
2002 certification for its BOLT.
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The Equities trading was started from November 1994 and Derivatives trading was
stared from June 2000. Index value of NIFTY is calculated by using 50 largest
companies from 24 different sectors. Base value of NIFTY is 1000 and base year is 1995.
NSE is also calculated for every 15 seconds.
After sort listing, we go to the calculation of BSE/NSE indexes. Before that we must
know what is market capitalization. I would to share that too.
Market capitalization:
Formula:
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Page
Market Capitalization = No of Shares Outstanding * Market price per share
Total Market Capitalization = Market capitalization of NSE 50 / BSE 30
companies.
This is directly opposite to the Market capitalization. i.e. Except the Locked Shares
(which includes promoter holdings, government holdings).
For Example:
1.XYZ:
Imagine XYZ one of the company (which is among NSE 50 or BSE 30).
XYZ has 1000 shares among that government is holding 300 shares, promoter holding
is 500 shares, and 200 shares are available in market and price of a share is Rs. 10.
2.ZYX:
ZYX has 2000 shares among that government is holding 500 shares, promoter holding
is 500 shares, and 1000 shares are available in market and price of a share is Rs. 20.
EXAMPLE
Total Free float Market Capitalization = Free float Market capitalization of NSE
50 / BSE 30 companies.