In my previous post, I had mentioned that there are 30 companies that constitute the Sensex. You must be wondering how these companies are selected and on what criteria they are selected. Here are the criteria with which the companies are selected for BSE-Sensex.
The general guidelines for selection of constituents in SENSEX are as follows:
Listed History:The scrip should have a listing history of at least 3 months at BSE. Exception may be considered if full market capitalization of a newly listed company ranks among top 10 in the list of BSE universe. In case, a company is listed on account of merger/ demerger/ amalgamation, minimum listing history would not be required.
Trading Frequency:The scrip should have been traded on each and every trading day in the last three months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc.
Final Rank:The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market capitalization and 25% weightage to the liquidity rank based on three-month average daily turnover & three-month average impact cost.
Market Capitalization Weightage:The weightage of each scrip in SENSEX based on three-month average free-float market capitalization should be at least 0.5% of the Index.
Industry/Sector Representation:Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE.
Track Record:In the opinion of the BSE Index Committee, the company should have an acceptable track record.