BSE 100

What is the BSE 100?

The BSE 100, also known as the S&P BSE 100 index, is a benchmark equity index representing the top 100 large and mid-cap companies listed on the Bombay Stock Exchange (BSE) in India. Launched in 1989, the BSE 100 aims to provide a comprehensive reflection of the Indian equity market by including a diverse mix of sectors and industries. The index is designed to track the performance of the leading and most liquid stocks, offering investors a broad view of the overall market trends, investor sentiment, and economic health. The composition of the BSE 100 is dynamic, as it is reviewed and rebalanced periodically to ensure it remains relevant and accurately represents the evolving Indian economy.

It also serves as a useful benchmark for fund managers, investors, and analysts in evaluating the performance of portfolios and mutual funds. It forms the basis for various index funds and exchange-traded funds (ETFs), making it accessible to a wide range of investors. The BSE 100 is market capitalisation-weighted, which means that companies with higher market value have a greater impact on the index's movements. By tracking the BSE 100, investors can gain insight into the performance of some of the most significant companies in India.

BSE 100 stocks selection criteria

The selection of stocks for inclusion in the BSE 100 index is a thorough process, ensuring that only the most suitable companies are represented. The primary criterion is market capitalisation; only the top 100 companies with the highest market value listed on the BSE are considered. However, size alone is not sufficient. The stocks must also demonstrate sufficient liquidity, which is measured by trading frequency and volume over a set period, typically the past six months. Companies are required to be actively traded, with consistent price discovery to guarantee that the index is both investable and representative of actual market activity.

Sectoral representation is also taken into account to ensure the index adequately reflects the diversity and structure of the Indian economy. The BSE reviews the index composition semi-annually, considering corporate actions like mergers, demergers, or significant shareholding changes. To maintain transparency and credibility, only companies compliant with regulatory requirements and with a minimum public shareholding are eligible. Newly listed companies may be included if they meet the selection standards within a short time. This rigorous selection methodology ensures the BSE 100 remains a robust and relevant benchmark for the Indian equity market.

How is the BSE 100 index calculated?

The BSE 100 index is calculated using the free-float market capitalisation-weighted methodology. In this approach, the market capitalisation of each company represents the market value of its tradable (free float) shares, as opposed to the total outstanding shares. Free-float market capitalisation is determined by multiplying the company’s share price by the number of shares freely available for trading in the market. Each stock’s weight in the index is proportional to its free-float market capitalisation, ensuring that movements in larger, more widely held companies have a greater impact on the index value. The formula for the index is:

(Sum of free-float market capitalisations of all constituent stocks / Index divisor) × Base value

The base value of the BSE 100 was set at 1000 points in 1983. The divisor is adjusted over time to account for changes such as stock splits, bonus issues, new inclusions, or exclusions, ensuring the continuity and consistency of the index. The index is reviewed and rebalanced semi-annually to reflect the current market scenario. This calculation method ensures that the BSE 100 accurately represents the market performance of India’s top 100 companies.