Method in the Madness...

Isn’t it interesting to note that how often the ignorance of not knowing an art is as justified as it were a few chapters you deliberately skipped during school!

Strange enough, there is a "particular" art, rather a skill, often regarded as being anti-social. People possessed with this art being so popularly labeled as manipulators, operators, riggers! If it still doesn’t ring any bells, well then, I am talking about of the "art of investing in Stock Market"

Those bulls and the bears stories. Playing in these “bourses” is like being a “matador” in those Spanish bull fights. For those, who possess this art, “happy investing”, for those who don’t, might as well read on...
What is the Sensex? and what does it really indicate? Sensex (Sensitive Index) was formed in 1979 with a base of 100 and always governed by 30biggest companies as per Market Capitalization (MCAP), taken across the board of all sectors.

MCAP? That is the number of shares of the company multiplied by the share value. In short, if you were to buy any company, that is amount of money, you have to pay.

But that is not all. There is something called as Free-Float in the market. This is amount of shares which can traded on the exchange.

Because off-course, shares held by Directors, Owners, Preference Share Holders are never traded on the exchange. These are held by them and never traded by "matadors" in the bull ring..! Only those shares which are alloted to the public to raise the initial amount of money are traded on the exchange. So now you have Free-Float MCAP.

The Free-Float MCAP of 30 biggest companies was then considered and taken as base in 1979 and the index was given a base of 100...And the weightage of each company on this index depends on their individual MCAP.

So when a share price of any of these companies increase, so will the MCAP and so will the Free Float MCAP. But what about the index figure?

It’s a representation of how much that “100” has grown into today! If MCAP of 30largest companies then was 100, today it 15,000!

In practical sense, if you put 1lakh Rs. in Sensex then, today you would have made 1.5Cr.Rs.!

So, there could be a mixed day, when Reliance share will charge 5%, and say reliance contributes 10% weightage to the index, the Sensex will move up by 0.5% due to Reliance, and so on for the other 29 largest listed companies.

For the number game though, today the Sensex has a Free Float MCAP of around

1.03 Million Crore Indian Rupees!

1 point swing means roughly around 65 Crore Rupees of liquid cash on the line!