WHAT IS SENSEX ? ( how can you make RS.5 cr. from investing RS.20000 monthly )

                             

TOPICS COVERED

1.WHAT IS SENSEX ?

2. HOW TO MAKE IS RS.5 CR BY INVESTING 20000 MONTHLY ?


*topics covered in other blogs

what is nifty sensex

what is the sensex today

what is nifty and sensex


WHAT IS SENSEX?                                                

For an investor it's vital to understand the essential terminologies like Sensex meaning, what's Sensex, how the calculation are done.

Therefore, allow us to learn and understand about it here.

The term Sensex was named by a stock exchange analyst Mr. Deepak Mohini, the word is the combination of Sensitive and Index. The Sensex is primarily an index which reflects the Bombay stock market (BSE) which got established in 1875. Indian stock market had no official index until Sensex was introduced on jan1 1991. The Sensex comprises of 30 prominent stocks which are derived from sectors and are traded actively within the exchange market. Sensex truly reflects the Indian stock exchange movement. If the Sensex value increases it means there's a general increase within the prices of shares whereas, if the Sensex decreases it means there's a general decrease within the price of shares.

You can identify the booms and busts getting into the stock exchange through S&P BSE Sensex. From Feb 19, 2013, BSE and S&P entered into an alliance to calculate Sensex. Nifty is that the other index calculated in India for the National stock market .

Sensex comprises of the 30 stocks  that are largely traded in big volume on BSE, providing a better representation of India’s economy. The Sensex is one among the oldest stock indexes in India. Sensex is employed to watch the general growth, development of particular industries, ups and downs of the Indian economy by the investors.

Calculation Methodology for Sensex


Historically Sensex used the weighted market capitalisation methodology, but from September 1, 2003, it shifted to Free Float market capitalisation methodology. All the main indices within the world use an equivalent methodology. The performance of the 30 selected key stocks directly reflects the extent of the index.

Free-Float market capitalisation = market capitalisation * Free Float Factor


Now let’s see what's mentioned because the Free Float Factor?


Free Float is mentioned as that there have been of the entire shares issued by the corporate that's readily available for trading within the market. It excludes the shares that are held by the promoters, government, etc.


To understand better let’s check out an example: If the corporate has 100 shares, during which 30 are held by the govt or the promoters and therefore the remaining 70 are available for trading to general public then, those 70 shares are the free-floating shares and thus the free float factor are going to be 70%. Whereas the word market capitalisation represents the valuation of the corporate . market capitalisation is decided by multiplying the worth of a stock with the amount of shares issued by that company.

Hope till now you've got learnt about what's Sensex meaning, its methodology; now let’s look how Sensex is calculated. The above two terminologies play a serious role while calculating Sensex.

                                                     

How Sensex is calculated?

The Sensex comprises of the 30 stocks which are selected consistent with the standards set.

The Market capital value of all the 30 companies are determined.

The Free Float market capital value  of all the 30 companies is decided .


Of all the 30 companies the Free Float market capitalisation is summed up to urge a complete of all the Free Float market capitalisation .

As the formula of Sensex= (total free float market capitalization/ Base market capitalization) * Base index value.

The base year to calculate Sensex is 1978-79, the bottom value is static but it's to be changed. consistent with BSE Rs. 2501.24 crore is to be used because the base market capitalisation .

The base index value is 100.

Therefore,

Sensex= free float market capitalisation of 30 selected companies /25041.24 crores* 100


(The free float market capitalisation of 30 selected companies are added and which get divided by 2501.24 crores and multiplied by 100.)


Now in simple language,

So in layman language , SENSEX is an index which is employed by Bombay stock exchange (BSE) to represent the condition of stock market. BSE contains quite 3000 listed companies , but Sensex represents data of only 30 top working stocks.I HOPE YOU catch on AND SENSEX IS sort of a BROTHER OF NIFTY.if you don’t realize you CAN  check my blog on NIFTY.


What is Sensex PE ratio?

Sensex PE Ratio is one among the foremost basic & fundamental thing that's seen by investors while investing in equities. Sensex PE Ratio gives a better representation of valuation of the market (overvalued, undervalued or rightly valued). during this article we'll share why P/E(Price/Earning) Ratio is important for each investor, how PE for single stock is calculated, how SENSEX PE is calculated, what was the typical Sensex PE in past & where you probably did mistakes and you'll also find the present SENSEX PE.

Calculated PE of any stock

                                                   

To understand the worth of share market, we'd like to know PE of SENSEX. But let’s first attempt to understand how P/E is calculated for single stock

PE=Price (MPS-Market Price Per Share )/Earning (EPS-Earning Per Share)

To understand PE, we'd like to first understand Price and therefore the earning per share (EPS) of stock for this we take example of Infosys. Current market value of Infosys is Rs. 3000. Now what about earning per share? If we divide the entire net income (past 12 months) of Infosys by the numbers of shares it's , we'll get what's referred to as Earning per share so EPS of Infosys comes bent be 111. Now we will divide Price by EPS, we'll get Infosys current PE that's 27(3000/111). In simple words PE is nothing but the worth that an investors able to pay to earn Re. 1 per annum .To understand Sensex PE Ratio, we'd like the worth and therefore the earnings of Sensex. Sensex is nothing but price movement of 30 big companies in India like RIL, Infosys, TCS, Maruti etc. Price of Sensex is nothing but what's quoted before us – Sensex at 20000 or Sensex at 21000. Now what about earnings? Now these companies are working for profits which are meant for owners of the corporate . just in case of companies, owners are shareholders. Now if we divide the entire net income of the corporate by the amount of shares it's , we'll get is understood as Earning Per Share (EPS). Now if we add the EPS (according to weightage – for eg. weightage of reliance in Sensex is 11% its current EPS is 53 so 5.83 are going to be used similarly for other companies) of all 30 companies, we get the EPS of Sensex. The combined EPS of Sensex is that the earning which we were watching . Now PE of Sensex is nothing but Level of Sensex/EPS.


WHEN to take a position AFTER WATCHING PE RATIO?

So the next step is to take a position ,now the most question is when to take a position after watching PE ratio.

So, when the PE RATIO is low that's near 10 then it shows that you simply can earn 1rs. On every 10rs you invest basically means the shares are undervalued at that point so you ought to invest money in order that you'll get high returns .


And when the PE RATIO IS high that's near 25 then it shows that you simply will earn 1rs. On every 25rs. You invest basically it means the shares are overvalued and it’s time to disinvest.


HOW TO MAKE RS.5CR FROM RS. 20000 ?

                                                                                       

So allow you to earn almost ₹ 50000 per month and your monthly expenditure are ₹ 30000


It means you save ₹ 20000 per month so if you retain saving 40 percent of your salary for next 20 years you'll have rs.1.7 cr.


But if you invest these 20000 monthly in equity shares for next 20 years you'll have 5.4 cr. that's almost 3 times your savings 

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