There are two national stock exchanges in the country, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Most large brokers hold membership cards in both exchanges, offering investors a choice of placing their trades on either bourse.
Bombay Stock Exchange (BSE)
The BSE is the oldest stock exchange in the country, established in 1875. It was structured as a membership based firm, an Association of Persons. It is now a demutualised and corporatised entity, falling in line with Sebi's guidelines on demutualization of stock exchanges. The purpose is to separate ownership and management to prevent any conflicts of interest.
The BSE is managed by a Board of Directors, comprising professionals, trading member representatives and has a managing director too. The Board formulates larger policy issues and exercises overall control. The managing director takes care of daily operations. The exchange is present in 417 cities in India.
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Types of Members |
Numbers |
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Individuals |
180 |
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Indian companies |
719 |
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Foreign Institutional Investors |
22 |
Source : www.bseindia.com, as of Feb’07
Business Transacted on the BSE
There were 7639 scrips that are listed on the BSE. Not all are actively traded, with the number of scrips traded in Feb’07 at 2602. The average cash segment daily turnover on the BSE was Rs 4,675 crore in Feb’07 and the market capitalization of scrips listed on the BSE was Rs 34.9 lakh crore. The derivatives segment turnover in the month of Feb’07 was Rs 13,189 crore in Feb’07.
These statistics keep changing, to get an update on the latest statistics, go to www.bseindia.com. This link in particular may give you current information : http://www.bseindia.com/about/st_key/volumeofturnoverbusiness_tran.asp.
BSE Indices
The BSE maintains several stock indices that are popular among investors. The following are some of the closely watched indices.
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BSE Sensitive Index (BSE-30) |
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BSE National Index (BSE-100) or BSE 100 |
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BSE-200 and the Dollex |
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BSE-500 |
Apart from these, there are a host of other indices which focus on certain sections of stocks like small cap and mid-cap stocks. Then there are various other indices that are focused on sectors. These indices are updated on a real time basis in market hours.
The most popular index is the BSE Sensitive Index, the Sensex.
BSE Sensitive Index (Sensex)
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Coverage: Originally, it comprised 30 companies from both the "specified" i.e., ‘A’ group and the "non-specified" i.e., ‘B1 & B2’ groups. However, at present all the securities included in the Sensitive Index are specified group shares. These shares are selected on the basis of their liquidity, depth, and floating-stock-adjusted depth, as well as on the basis of industry representation. |
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Method of compilation: The compilation of the index values is based on the 'weighted aggregates' method. In this method, the number of equity shares outstanding for that stock weights the price of a component share in the index. This way, each security will influence the index in proportion to its relative importance in the market. When the price of a share is multiplied by the number of its equity shares outstanding, the result is the current market value for that particular security. The index on a day is calculated as the percentage of the aggregate market value of the equity shares of all the companies in the sample on that day to the average market value of the same companies during the base period for that index. This method of compilation has the advantage that it has the necessary flexibility to adjust for price changes caused by various corporate actions. The methodology is the same as that employed in many popular indices such as the Standard & Poor’s 500, Dow Jones Index, Hang Seng Index, NYSE Composite Index and FT-SE 100 Index. |
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It is a wealth-measuring index where the prices are weighted by market capitalization. Initially, the index was computed on full market capitalization but since April 2003, it has moved to a free float market capitalization method. In such an index the base period values are adjusted for subsequent rights and new issue of equity. This adjustment prevents a distorted picture and gives an idea of wealth created for investors over a period. |
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Base year: The financial year 1978-79 was chosen as the base year. Considerations for the choice were the price stability during that year and proximity to the period of introduction of the index. One of the important aspects of maintaining continuity with the base year is to update the base year average. The base year value adjustment ensures that the rights issue and new capital of the index securities do not destroy the value of the index. |
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On-line computation of the index : During market hours, the BSE’s computers automatically use the prices of the index securities at which trades are executed to calculate the Sensex in a process of continuous updation. |
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Reconstitution of the BSE Sensitive index: Reconstitution is being carried out whenever required because some stocks might have lost their liquidity or investors may have found some new industry specific fancy. Base change calculation: The changes are in effect proportional adjustments in the base year average market value to offset price changes in market values upon which the index is based. |