BSE 200

What is BSE 200?

The BSE 200, also known as the S&P BSE 200, is a stock market index on the Bombay Stock Exchange (BSE) that tracks the performance of the top 200 companies listed on the exchange. These companies are included in the index on the basis of their market capitalisation and liquidity, ensuring that the index represents a broad spectrum of the Indian economy. The BSE 200 index includes companies from various sectors such as finance, technology, consumer goods, and industrials, providing a comprehensive overview of the market.

The BSE 200 index was introduced to give investors a more extensive and diversified perspective of the stock market compared to narrower indices like the BSE Sensex that comprises only 30 companies. The BSE 200 index includes both large-cap and mid-cap companies, making it a balanced index that reflects the performance of the broader market. This makes the BSE 200 a popular choice for those investors who are looking to gain exposure to a wide range of industries within the Indian economy.

Investing in the BSE 200 offers several advantages. It provides a diversified portfolio, reducing the risk associated with investing in a single stock or sector. The index is also a benchmark for mutual funds and other investment products, allowing investors to track the performance of their investments against a broad market measure. Additionally, the BSE 200 is reviewed semi-annually and rebalanced to ensure it remains representative of the market, thereby maintaining its relevance and reliability for investors.

How is the BSE 200 Index Calculated?

The BSE 200 index is calculated using a free-float market capitalisation method. This approach considers only the shares available for public trading and excludes those held by promoters, government, and other entities with a controlling interest. This method provides a more accurate reflection of market movements and investor sentiment.

To calculate the BSE 200 index, the free-float market capitalisation of each constituent company is determined by multiplying its stock price by the number of shares available for trading. The total free-float market capitalisation of all 200 companies is then aggregated. The index value is derived by dividing this aggregate by a base value, which is adjusted periodically to reflect changes such as stock splits, dividends, and other corporate actions.

BSE 200 Index =(Sum of Market Capitalisation of Constituent Stocks) / (Base Market Capitalisation) × (Base Index Value)

The selection of stocks in the BSE 200 is based on several criteria, including liquidity, market capitalisation, and trading frequency. For example, if Company A has a total of 10 Cr. shares in the market at a trading price of ₹ 1,000 per share, then its total market capitalisation will be ₹ 10,000 Cr. However, if its free-float factor is 70%, then the free-float market capitalisation will be ₹ 7,000 Cr. Now, if Company B has ₹ 3,000 Cr as free-float market capitalisation, their weights in the index would be proportionate to these values.

What is the Objective of BSE 200?

The primary objective of the BSE 200 index is to provide a comprehensive and reliable benchmark that reflects the performance of the top 200 companies listed on the Bombay Stock Exchange. By including a broad range of companies from various sectors, the BSE 200 aims to represent the overall health and trends of the Indian stock market, offering investors a diversified and balanced view of market performance.

One of the key goals of the BSE 200 is to facilitate investment decisions. By tracking the performance of 200 leading companies, investors can gauge market trends, assess sectoral performance, and make informed investment choices. The index serves as a benchmark for various financial products, including mutual funds and exchange-traded funds (ETFs), allowing investors to compare their portfolio performance against the broader market.

Another objective of the BSE 200 is to promote market transparency and efficiency. By regularly reviewing and rebalancing the index, the Bombay Stock Exchange ensures that it accurately reflects the current state of the market. This continuous updating process helps maintain investor confidence and supports the integrity of the stock market.

The BSE 200 also aims to attract both domestic and international investors by providing a reliable and comprehensive market indicator. By including companies of different sizes and from various sectors, the index appeals to a wide range of investors, from those looking for stable, large-cap stocks to those interested in high-growth mid-cap companies. This broad appeal helps increase market participation and liquidity, contributing to the overall growth and development of the Indian stock market.

S&P BSE 200 FAQ's