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Adani Ports and Special Economic Zone Ltd (APSEZ) will become the first Adani Group company to be included in the Sensex at the Bombay Stock Exchange, replacing Wipro on June 24. APSEZ and Adani Enterprises, the flagship of the Adani Group, are already part of the Nifty at the National Stock Exchange, the other stock market index that tracks the performance of a set of large and actively traded companies in the country.
The announcement has come months after activist short-seller Hindenburg Research accused the Adani Group of stock manipulation and accounting fraud, which led to the share prices of Adani companies crashing by 30-80%. These stocks, including APSEZ and Adani Enterprises, have now recovered to higher than pre-Hindenburg levels. Adani has denied any wrongdoing.
Both the Sensex and Nifty are tools by which traders and market participants measure the domestic market’s performance. While Sensex considers 30 stocks; the Nifty considers 50. Companies that are included in the Sensex and Nifty are selected based on specific criteria.
Launched in 1986, the Sensex is the country’s oldest and most tracked bellwether index. It is designed to measure the performance of the 30 largest, most liquid, and financially sound companies across key sectors of the Indian economy that are listed at BSE Ltd. Among the companies that are part of the Sensex are Reliance Industries, ICICI Bank, and ITC Ltd.
These companies are selected to represent the broader Indian equity marketplace. As such, even though the Sensex is composed of only 30 stocks, investors make decisions to buy or sell based on the movement of the Sensex.
As of May 24, the total market capitalisation, or the total value of all listed shares, of BSE-listed firms was Rs 419.99 lakh crore.
The difference lies in the number of stocks that each index tracks. While the Sensex constitutes 30 companies trading on the BSE, the Nifty 50 is a broad-based index consisting of 50 blue chip large and liquid stocks traded on the National Stock Exchange of India (NSE).
The Nifty 50 was started in November 1995. It includes companies such as Adani Enterprises, Bajaj Finance, and Coal India. The market capitalisation of NSE firms stood at Rs 416.04 lakh crore as of May 24.
To be considered for selection, a stock must satisfy certain requirements. The Sensex is reconstituted biannually, in June and December of every year.
*It must have a listing history of at least six months at BSE, and it should have traded on every trading day at the BSE during this six-month reference period.
*To be eligible, the stock should have a derivative contract, that is, an agreement between two parties to buy or sell any form of security at a certain price in the future. A derivative is a financial instrument whose value is based on the value of an underlying asset like equities and currency.
*The company must be among the top 75 companies based on their average three-month float or total market cap. It should have a minimum free-float market cap of 0.50% after market cap and liquidity criteria are met.
*In terms of liquidity, the cumulative weight of the three-month average daily value traded (ADVT) is calculated for companies that meet the eligibility requirements. Any prospective constituents with a total weight of ADVT greater than 98% are excluded from the index.
