BSE LargeCap

What is the BSE Largecap?

The BSE Largecap is a major stock market index curated by the Bombay Stock Exchange (BSE) in India. It represents and tracks the performance of the largest (by full market capitalisation) and most influential companies listed on the exchange, commonly referred to as large-cap companies. These corporations are generally industry leaders with a significant presence in their respective sectors, substantial market capitalisation, robust financials and a proven history of operational stability and growth.

The BSE Largecap index is widely regarded as a barometer of the Indian equity market’s health and overall economic environment, as these large companies tend to be less susceptible to market volatility compared to smaller firms. The index includes companies from a diverse range of sectors, including banking, information technology, energy, consumer goods, pharmaceuticals and more, offering a broad snapshot of the Indian corporate landscape. Because of their size, reputation and established nature, large-cap companies are generally favoured by institutional investors, mutual funds, pension funds and retail investors who are looking for relatively stable and reliable investment opportunities.

The BSE Largecap index serves as a benchmark for large-cap mutual funds and ETFs, helping you as an investor evaluate the performance of your portfolios against the leading companies in the Indian market. Tracking this index allows market participants to gauge economic trends, sectoral growth, and shifts in investor sentiment, making it a key tool for anyone engaging with Indian equities.

BSE Largecap stocks selection criteria

The selection criteria for the BSE Largecap index are structured to ensure that only the most significant and liquid companies are included, thus maintaining the index’s integrity and relevance. Primarily, a company must be listed on the Bombay Stock Exchange and be among the top stocks by full market capitalization—usually, the ones that fall within the top tier by full market capitalisation. Market capitalisation is calculated as the product of a company’s share price and its total number of outstanding shares, but for the index, a free-float adjustment is made, considering only shares available for public trading and excluding those held by promoters or the government.

The stocks must also display high trading liquidity, which is assessed based on average daily turnover and trading frequency over a specific period, ensuring that you can buy and sell these stocks easily without causing significant price movements. Additional requirements include compliance with all regulatory guidelines, absence of any trading or legal restrictions, and a minimum track record of being actively traded on the exchange.

The sectoral representation is also taken into account to avoid over-concentration in any one sector, thus balancing exposure across the Indian economy. The index is reviewed and rebalanced semi-annually, during which stocks that no longer meet the criteria may be removed, and emerging large-cap companies can be added.

How is the BSE Largecap index calculated?

The BSE Largecap index is calculated using the free-float market capitalisation weighted methodology, which provides a more accurate reflection of the market value available for trading by public investors. In this calculation, only the shares that are readily available for trading – excluding those held by promoters, government, or locked-in shares – are considered. The process begins by determining the free-float market capitalisation of each constituent company, which is done by multiplying the company’s free-float factor by its total market capitalisation.

The sum of the free-float market capitalisations of all the index constituents is then divided by a predetermined index divisor. The index divisor is a crucial figure that maintains the continuity of the index value over time, especially when corporate actions such as stock splits, bonus issues, rights issues, or changes in the list of constituents occur. This adjustment ensures that such events do not cause artificial distortions in the index value.

The value of the index at any given moment reflects the aggregate performance of its constituent companies, making it a real-time indicator of the large-cap segment’s performance. Prices used for the calculation are based on the latest available traded prices of the constituent stocks. The index is reviewed and rebalanced semi-annually to account for changes in market capitalisation, liquidity, and other eligibility criteria.