BSE 100

What is BSE 100?

If you've heard of the Sensex, you're probably familiar with one of India's most important stock indexes. The BSE 100 is an important index as well, that is used by investors and analysts alike for evaluating the growth of the Indian economy.

The S&P BSE 100 stock index tracks the performance of the top 100 most liquid organisations listed on the Bombay Stock Exchange (BSE). These companies, classified as mid- or large-cap, contribute to the BSE 100 index. Changes in the BSE 100 share price have a direct impact on the index's value.

In simpler terms, the BSE 100 is made up of publicly traded shares that are not closely held. The list of BSE 100 companies is reviewed and revised twice a year, in June and December. Several factors influence the selection of the top 100 stocks for inclusion in the S&P BSE 100. Furthermore, the BSE generates a dollar-based counterpart of the BSE SENSEX 100 called Dollex-100, which reflects the index's value in USD.

Understanding the BSE 100 index provides insight into the state of India's stock market. Since it includes a diverse range of businesses, its performance provides an understanding of the whole economic situation. Keep reading to keep track of the BSE 100 today and understand the dynamics of its stocks and their impact on the market.

How are stocks chosen for inclusion in the BSE 100 index?

Listing History Companies eligible for the BSE 100 index must have been listed for at least three months. This ensures that they have a track record in the market and have received adequate trade scrutiny.

Market Capitalisation: The companies should be in the large-cap or mid-cap category. Large-cap corporations have a higher market capitalisation, which reflects their size and market stability.

Liquidity: High liquidity is an important factor. Stocks must be traded on at least 95% of the days in the previous three months. This ensures that stocks are actively traded and widely available to investors.

Revenue Source: Companies' revenue should be derived primarily from their main line of business. This ensures that the businesses are fundamentally sound and do not rely on inconsistent sources of income.

Traded Value: A company's annualised traded value should exceed 10 million. This criterion emphasises the importance of active trading and guarantees that the index's components are market leaders.

How to calculate float-adjusted market capitalisation?

Calculating float-adjusted market capitalisation for the BSE 100 index is a simple but significant process. Here's how you can accomplish it:

First, determine a company's market capitalisation. This is accomplished by multiplying the total number of shares issued by the corporation by the current market price of its shares. This figure represents the total market value of the company's shares.

The next step is to determine the percentage of shares available for free trade, often known as the free-float factor. This factor excludes closely held stocks that are not easily available for trading on the stock exchange.

Once you've calculated the free-float factor, multiply it by the market capitalisation calculated in the previous step. This produces the float-adjusted market capitalisation, which accurately represents the market value of the company's publicly traded shares.

For example, consider Company XYZ, which has 2 lakh shares on the market. Only 70% of these are open for free trade. If the market price of Company XYZ's stock is Rs. 300, the calculation will be as follows:

Total Market Shares (A) = 2 lakh shares.

The market price per share (B) is Rs. 300

Total Market capitalisation (C) = AB = Rs. 6 crores.

The free-float factor (D) is 0.7, and the free-float market capitalisation (E) is Rs. 4.2 crore (CD).

The same approach is used for all 100 businesses in the BSE 100 index. The float-adjusted market capitalisation of all the 100 companies is taken together to calculate the overall value of the BSE 100 index. This figure is then compared to the market capitalisation in the base year (1983-1984) and multiplied by the base value of 100 to get the BSE 100 index value for the current period.

How to Invest in the S&P BSE 100 Index?

Investing in the S&P BSE 100 index doesn't have to be complicated. Here's a straightforward guide to help you get started:

Select Your Investment Method: Determine whether you wish to invest in individual stocks or through mutual funds/ETFs that track the BSE 100 index. Individual stock investments require extensive study and monitoring, but mutual funds/ETFs provide both diversity and ease.

Individual Stock Investment: If you choose to invest in individual stocks, investigate the firms listed in the BSE 100 index. Examine their financial performance, growth potential, and market trends. Monitor the BSE 100 share price on a regular basis and consider aspects such as dividend yield and earnings growth.

Mutual Funds or ETFs: Consider investing in mutual funds or exchange-traded funds (ETFs) that track the performance of the BSE 100 index. Look for funds with nominal fees and a proven track record. Mutual funds provide expert management and diversification, whereas ETFs offer flexibility and liquidity.

Open a Demat Account: To invest in stocks or mutual funds, you'll need a Demat account at a brokerage firm. Choose an established brokerage that offers a user-friendly interface and competitive costs.

Execute Your Trades: Once you've decided on an investment choice and opened a Demat account, you can begin executing your trades. Buy stock in the firms you've researched. Place orders to buy units of mutual funds or ETFs that track the BSE 100 index.

Monitor Your Investments: Keep an eye on the success of your investments and remain informed about market developments. Monitor the BSE 100 index and how your investments compare to it.

Assess and Adjust: Periodically assess your portfolio and make any required adjustments. Rebalance your investments to stay within your intended asset allocation and risk level.

S&P BSE 100 FAQ's