Sensex is the index of Indian share market. It tracks 30 large liquid stocks listed on BSE. The index value is shaped by their share prices. Up or down shows market mood. But the Sensex is not the entire market. Readers should also check stock market indices, sectors, volume and breadth.

What is Sensex?

Sensex is a benchmark index of BSE. It is based on the free float market value method. A firm’s weight is the value of the shares available for public trading. A large weight firm can move the index even if many shares move the other way. Hence the index should be read in conjunction with other data.

1. Look at the Day’s Price Range

Open, high, low and close. To start. Then note the change in points and per cent. These figures represent the Sensex movement through the day.

A green close doesn’t always mean steady demand. The index may initially rise and then give up part of its gain. A close near the low of the day can indicate late selling. A close near the high of the day can show demand near the end. Look at the same data for a week and a month to put a single session in perspective.

2. Find the Stocks That Moved

See which Sensex companies contributed to the rise or fall. Also, note their index weights. Banks, IT companies, oil companies and consumer companies can have a clear role in index moves.

Some heavy stocks may help Sensex to rise and many shares may fall. The index can be strong while the whole market is weak. This gap is visible on a list of gainers and losers.

3. Comparison to Other Stocks Indexes

Compare Sensex with Nifty 50 and broader market indices. Look at the mid and small cap indices too. A stock market index is a group of stocks that represent a market, sector, or segment.

If the Sensex is going up and mid and small cap indices are not going up, it could be the big companies are making the Sensex go up. When many indices move up, market groups support the move. Sector indexes add colour. Indices: Bank, IT, Auto, Pharma, Metal, Energy, FMCG

4. Read the market breadth

Market breadth is the measure of the number of advancing shares versus declining shares. It helps to show if an index move is broad or narrow.

The Sensex can move up even if more shares are declining than advancing. This means the index could be driven by a small group. Check also the 52-week high and low of shares.. They can show where strength is seen or where stress is seen.A green close doesn’t always mean steady demand. The index may initially rise and then give up part of its gain. A close near the low of the day can indicate late selling. A close near the high of the day can show demand near the end. Look at the same data for a week and a month to put a single session in perspective.

5. Check out Volume and Price Swings

Volume tells us how much trading went on. A sharp index move with active volume could indicate strong interest. Such a move on slim volume may need further checking.

Price swings matter, too. The Sensex can move fast with RBI or US Fed news, firm results, global events or expiry days. India VIX tracks the market’s expectation of near-term price volatility. It does not forecast the next move of the market.

6. Watch the key market clues

Rates, inflation, rupee, crude oil, bond yields and company profit numbers. Flows of funds from foreign and Indian firms can also affect trade. Global equity markets may set the tone for the start of trade in India.

Do not consider a single cue as a trade signal. The news could be already priced in. The market can also react differently to an event than the first impression of the event.

7. Create a Simple Daily Process

Follow in this order every day:

• Sensex opening, highest, lowest, closing, change:
• See the stocks and sectors that fuelled the move.
• Comparison of Nifty 50 and broad market indices.
• Check out the market breadth and volume.
• India VIX and important news check.
• Match the data to your goal, time horizon and risk tolerance.

Bajaj Broking’s Sensex page, index list, charts, market news and study guides are very well suited to the job. With these tools, readers can track data in one place and learn how index moves are made. Any data or report still needs to be compared to the reader’s purpose and risk limit.

Conclusion

Sensex is a quick look at 30 major BSE companies. But one index can’t tell the whole market story. A clear review should include other stock market indices, sector, stock weights, breadth, volume, price swings and key news. A fixed process will help readers explore the market without hasty decisions.