The Bombay Stock Exchange (BSE) SENSEX, an acronym for Sensitive Index, is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the BSE. The SENSEX, introduced in 1986, has become a barometer of India’s economic health, reflecting the country’s growth story.

The inception of SENSEX dates back to January 1, 1986, when it was first compiled using the ‘Market Capitalization Weighted’ methodology. The base year of SENSEX was taken as 1978-79, and the base index value was set at 100. The selection of the companies was based on their market capitalization, industry representation, trading frequency, and other relevant factors.

The SENSEX was not just a first for India, but it was also the first equity index in the world to convert to the free-float methodology in September 2003. This methodology considers only those shares issued by the company that are readily available for trading in the market. It makes the index more broad-based by reducing the concentration of top few companies.

Over the years, the SENSEX has seen numerous highs and lows, reflecting the country’s economic fortunes. The index crossed the 1,000 mark for the first time in 1990, a significant milestone that signaled India’s burgeoning economic potential. The 2000s marked a period of rapid growth, with the SENSEX crossing the 10,000 mark in 2006 and the 20,000 mark in 2007. However, the global financial crisis in 2008 saw a sharp fall, only for it to recover in the subsequent years.

The SENSEX has also undergone several revisions in its composition to keep up with the changing economic landscape. The companies listed on the SENSEX have changed over time, reflecting the rise and fall of different sectors in the Indian economy. From traditional sectors like textiles and manufacturing to the current dominance of IT and financial services, the SENSEX has mirrored the structural changes in the Indian economy.

The name ‘SENSEX’ itself is interesting. It is a portmanteau of the words ‘Sensitive’ and ‘Index’, signifying its sensitivity to changes in the economy. The name aptly captures its role as a sensitive barometer of India’s economic health.

In conclusion, the history of SENSEX is a testament to India’s economic journey. From its inception in 1986 to the present day, it has evolved in sync with the Indian economy, reflecting the country’s economic highs and lows. As we move forward, the SENSEX will continue to be a crucial indicator of India’s economic progress, guiding investors and policymakers alike.