COMPUTATION OF INDIAN STOCK MARKET INDICES

SENSEX

BOMBAY STOCK EXCHANGE LIMITED.

"Emerge as the premier Indian stock exchange by establishing global benchmarks" PROJECT COORDINATOR PROF. MOHIUDIN SANGMI SUBMITTED BY ABDUL ROUF KHAN MFC IV 6246

DEPARTMENT OF BUSINESS AND FINACIAL STUDIES

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

UNIVERSITY OF KASHMIR
INTRODUCTION OF BSE Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asia. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).Bombay Stock Exchange Limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement of Business on 12th August, 2005. The 'Due Date' for taking over the business and operations of the BSE, by the Exchange was fixed for 19th August, 2005, under the Scheme. The Exchange has succeeded the business and operations of BSE on going concern basis and its recognition as an Exchange has been continued by SEBI. With demutualisation, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors. The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of market intermediaries. In terms of organization structure, the Board formulates larger policy issues and exercises overall control. The committees constituted by the Board are broad-based. The day-to-day operations of the Exchange are managed by the Managing Director & CEO and a management team of professionals.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietory system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

Vision "Emerge as the premier Indian stock exchange by establishing global benchmarks"

Board of Directors
Non-Executive Chairman

Mr. Jagdish Capoor Public Interest Director Chairman HDFC Bank Ltd

Managing Director & Chief Executive Officer

Mr.Madhu Kannan

Public Interest Directors

Mr. Jitesh Khosla - IAS Joint Secretary Ministry of Corporate Affairs, Govt. of India

Mr. S. N. Menon - IAS (Retd.) Director Nicco Parks & Resorts Ltd

Shareholder Directors
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

Mr. Ishaat Hussain Director Tata Sons Ltd

Mr.Vivek Kulkarni-IAS (Retd.) Chairman and CEO Brickwork India Pvt. Ltd.

Mr. Sudipto Sarkar Senior Advocate Kolkata High Court

Mr. Wai Kwong Seck Senior Executive V.P. and CFO Singapore Exchange Ltd

Trading Member Directors

Mr. Prakash R. Kacholia Designated Director Emkay Global Financial Services Ltd.

Mr. Balkishan Mohta

Ms. Deena A. Mehta Designated Director Asit C. Mehta Investment Interrmediates Ltd.

MANAGEMENT TEAM
(As of December 2009)
Sl. No. 1 2 3 Name Designation Department PJ. Towers Floor 15th 15th 25th Board Extn. No. 8000 8599 8077

Mr. MADHU KANNAN Mr. ASHISHKUMAR CHAUHAN Mr. L P AGGARWAL

Managing Director & Chief Executive Officer Dy. Chief Executive Officer Chief Financial Officer

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Mr. ANJAN CHOUDHURY Mr. NEHAL VORA Dr. SAYEE SRINIVASAN Mr. JAMES E. SHAPIRO Mr. S. UPPILI KRISHNAN Mr. A. A. TIRODKAR Mr. KEVIN D'SOUZA Mr. PRASANA RAO Mr. SUNIEL VICHARE Ms. DEVIKA SHAH Mr. S. S. BOLAR Mr. SANJAY SAKSENA Mr. C. VASUDEVAN Mr. DILIP OAK Mr. GOPALKRISHNAN K. IYER Mr. KALYAN S. BOSE Mr. K. A. BULSARA Mr. LALIT RANPURIA Mr. MAHENDRA TAWDE Mr. RAHUL SHARMA Mr. SANJIV KAPUR

Chief Technology Officer Head - Planning & Policy Head - Product Strategy Head - Market Development Executive Assistant Chief General Manager Chief General Manager Chief General Manager Chief General Manager Senior General Manager Senior General Manager Senior General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager General Manager Office of CEO Speciality Sales Administration / Premises Human Resources Member / Institutional Sales Surveillance / Inspection & Investigation Investments / Accounts International Affairs BTI Information Technology Listing Compliance Communications Market Operations Information Technology Human Resources Information Technology Membership Compliance & DIS

13th 14th 15th 15th 15th 15th 24th 24th 15th 24th 25th 19th 18th 13th 14th 25th 25th 13th 24th 3rd 1st

8001 8108 8814 8395 8800 8005 8345 8230 8090 8040 8094 8455 8064 8314 8530 8740 8241 8222 8560 8231 8011

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

25 26 27 28

Mr. SUNIL KAPADIA Mr. TUSHAR AMBANI Mr. V. G. BHAGAT Mr. VINAY PAI

General Manager General Manager General Manager General Manager

Legal (Commercial) Post Trade / ICCL Corporate Secretarial Debt Markets

25th 1st 25th 1st

8020 8007 8041 8176

KEY STATISTICS
I. BUSINESS TRANSACTED AT BSE Turnover, Average Daily Turnover, Turnover for the month, V-SAT Turnover, No. of Shares Traded, No. of Script Traded, Deliveries, Market Capitalisation, No. of Trading Days, Derivatives. II. LISTING AND CAPITAL RAISED No. of Companies Listed, No. of Scrips Listed, Newly Listed securities of existing companies, Capital Listed during the month, Amount offered/raised through IPO & Rights, Capital raised through FCCB/Euro Issue. III. INDEX AND RATIOS BSE Sensitive Index, BSE TECK Index, BSE 100 Index, BSE 200 Index, Dollex-200, BSE 500 Index, P/E Ratio, Price to Book Value, Dividend Yield %. IV. BUSINESS TRANSACTED BY FIIs No. of Registered FIIs, FIIs transactions in BSE, FIIs transactions (Equity & Debt) all India. V. MEMBERSHIP AND TWS No. of Members, No. of Trader Work Station (TWS), No. of Cities. VI. DOLLAR EXCHANGE RATE Rupee Dollar Rate.
Conversion Table 1 Billion = 100 Crore, 1 Crore = 10 Million, 1 million = 10 Lakh, 1Lakh = 100 Thousand.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

HISTORY OF SENSEX For the premier Stock Exchange that pioneered the stock broking activity in India , 133 years of experience seem to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "Bombay Stock Exchange Limited" by paying a princely amount of Re1. Since then, the stock market in the country has passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. Bombay Stock Exchange Limited (BSE) in 1986 came out with a Stock Index that subsequently became the barometer of the Indian Stock Market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.

The index was initially calculated based on the full market capitalization methology but was shifted to the free float methology with effect from September 1, 2003. The free-float market capitalization methology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE,STOXX,S&P, and DOW JONES use the free float methology.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

SENSEX The BSE Sensex or Bombay Stock Exchange Sensitive Index or BSE 30 is a value-weighted index composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79. At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions.

Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX. The index has increased by over ten times from June 1990 to today. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

SCRIP SELECTION CRITERIA The general guidelines for selection of constituents in SENSEX are as follows: Listed History The scrip should have a listing history of at least 3 months at BSE. Exception may be considered if full market capitalisation of a newly listed company ranks among top 10 in the list of BSE universe. In case, a company is listed on account of merger/ demerger/ amalgamation, minimum listing history would not be required. Trading Frequency The scrip should have been traded on each and every trading day in the last three months. Exceptions can be made for extreme reasons like scrip suspension etc. Final Rank: The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market capitalisation and 25% weightage to the liquidity rank based on three-month average daily turnover & three-month average impact cost. Market Capitalization Weightage The weightage of each scrip in SENSEX based on three-month average free-float market capitalisation should be at least 0.5% of the Index. Industry Representation Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE. Track Record In the opinion of the Committee, the company should have an acceptable track record.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

UNDERSTANDING FREE-FLOAT METHODOLOGY Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalization of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market. In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and BANKEX in June 2003. While BSE TECk Index is a TMT benchmark, BANKEX is positioned as a benchmark for the banking sector stocks. SENSEX becomes the third index in India to be based on the globally accepted Free-float Methodology. MAJOR ADVANTAGES OF FREE-FLOAT METHODOLOGY A Free-float index reflects the market trends more rationally as it takes into consideration only those shares that are available for trading in the market. Free-float Methodology makes the index more broad-based by reducing the concentration of top few companies in Index. For example, the concentration of top five companies in SENSEX has fallen under the free-float scenario thereby making the SENSEX more diversified and broad-based. A Free-float index aids both active and passive investing styles. It aids active managers by enabling them to benchmark their fund returns vis-a-vis an investable index. This enables an apple-to-apple comparison thereby facilitating better evaluation of performance of active managers. Being a perfectly replicable portfolio of stocks, a Free-float adjusted index is best
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

suited for the passive managers as it enables them to track the index with the least tracking error. Free-float Methodology improves index flexibility in terms of including any stock from the universe of listed stocks. This improves market coverage and sector coverage of the index. For example, under a Full-market capitalization methodology, companies with large market capitalization and low free-float cannot generally be included in the Index because they tend to distort the index by having an undue influence on the index movement. However, under the Free-float Methodology, since only the free-float market capitalization of each company is considered for index calculation, it becomes possible to include such closely held companies in the index while at the same time preventing their undue influence on the index movement. Globally, the Free-float Methodology of index construction is considered to be an industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have adopted the same. MSCI, a leading global index provider, shifted all its indices to the Freefloat Methodology in 2002. The MSCI India Standard Index, which is followed by Foreign Institutional Investors (FIIs) to track Indian equities, is also based on the Free-float Methodology. NASDAQ-100, the underlying index to the famous Exchange Traded Fund (ETF) - QQQ is based on the Free-float Methodology. DEFINITION OF FREE-FLOAT Share holdings held by investors that would not, in the normal course come into the open market for trading are treated as 'Controlling/ Strategic Holdings' and hence not included in free-float. In specific, the following categories of holding are generally excluded from the definition of Free-float: Holdings by founders/directors/ acquirers which has control element Holdings by persons/ bodies with 'Controlling Interest' Government holding as promoter/acquirer Holdings through the FDI Route Strategic stakes by private corporate bodies/ individuals
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

 Equity held by associate/group companies (cross-holdings) Equity held by Employee Welfare Trusts Locked-in shares and shares which would not be sold in the open market in normal course. The remaining shareholders would fall under the Free-float category.

DETERMINING FREE-FLOAT FACTORS OF COMPANIES

BSE has designed a Free-float format, which is filled and submitted by all index companies on a quarterly basis with the Exchange. The Exchange determines the Free-float factor for each company based on the detailed information submitted by the companies in the prescribed format. Free-float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the Free-float market capitalization. Once the Free-float of a company is determined, it is rounded-off to the higher multiple of 5 and each company is categorized into one of the 20 bands given below. A Free-float factor of say 0.55 means that only 55% of the market capitalization of the company will be considered for index calculation.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

FREE-FLOAT BANDS:
% Free-Float Free-Float Factor >0 5% 0.05 >5 10% 0.10 >10 15% 0.15 >15 20% 0.20 >20 25% 0.25 >25 30% 0.30 >30 35% 0.35 >35 40% 0.40 >40 45% 0.45 >45 50% 0.50 % Free-Float Free-Float Factor >50 55% 0.55 >55 60% 0.60 >60 65% 0.65 >65 70% 0.70 >70 75% 0.75 >75 80% 0.80 >80 85% 0.85 >85 90% 0.90 >90 95% 0.95 >95 100% 1.00

INDEX CLOSURE ALGORITHM

The closing SENSEX on any trading day is computed taking the weighted average of all the trades on SENSEX constituents in the last 30 minutes of trading session. If a SENSEX constituent has not traded in the last 30 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day's closing price is taken for computation of Index closure. The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value. MAINTENANCE OF SENSEX

One of the important aspects of maintaining continuity with the past is to update the base year average. The base year value adjustment ensures that replacement of stocks in Index, additional issue of capital and other corporate announcements like 'rights issue' etc. do not destroy the historical value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect the index values.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

The Index Cell of the exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell ensures that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity. The Index Committee of the Exchange comprises of experts on capital markets from all major market segments. They include Academicians, Fund-managers from leading Mutual Funds, FinanceJournalists, Market Participants, Independent Governing Board members, and Exchange administration.

CALCULATION METHOLOGY

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

SENSEX is calculated using the 'Free-float Market Capitalization' methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization The base period of SENSEX is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of SENSEX involves dividing the Freefloat market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.

INDEX DIVISOR
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

The index divisor is an arbitrary number that is first defined when an index is first published. It's initial use is to divide the total value of the index to produce an initial index value that is a number which is easy to handle, such as the number '100'. Subsequently, the index divisor remains constant and is seldom adjusted except when securities are added or dropped from the index. Depending on the type of index, certain corporate actions on component stocks also require the divisor to be adjusted.

Divisor Adjustment for Price-Weighted Index

In a price-weighted index, the divisor is adjusted when a component stock issues a stock dividend or undergoes a stock split. Unlike in a capitalization-weighted index, the divisor of a price-weighted index does not need to be changed when a component stock issues additional stock via a secondary offering.

Divisor Adjustment for Capitalization-Weighted Index

In a capitalization-weighted index, the divisor is adjusted when a component stock issues additional stock via a secondary offering. Unlike in a price-weighted index, the divisor of a capitalization-weighted index does not need to be changed when a component stock issues a stock dividend or undergoes a stock split

DATA OF 8TH OF MAY 2008 FOR CALCULATION OF SENSEX

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

Scrip Code

Scrip Code 500325

532174 500209 500510 500325 532174 500010
500209 500875 500510 532454 500010

Scrip Name RELIANCE

Scrip Name

Last updated on Thursday, May 08, 2008 Close No. of Full Mkt. Cap. Free-Float Weight Mkt. Cap Shares(normal) (Rs. in Crores) Factor in Index(%) Price No. Close of Full Mkt. Cap. Adj. FreeFree-Float (Rs.in Crores) Weight
Price 2,527.65 Shares(normal) (Rs. in Crores) 1,453,648,601 367,431.49 Float 0.50 Mkt. Cap 183,715.74 in 16.02 1,111,477,508 97,148.69 Adj. 1.00 97,148.69 8.47 (Rs.in Crores) Index(%) 571,995,750 100,127.86 85,108.68 7.42 Factor 0.85
218.30 842.20 1,675.70 1,028.80 843.90 1,451.95 539.05 473.40 1,724.50 250.40 191.80 917.45 1,332.05 251.30 630.40 2,340.00 668.80 173.55 501.20 672.25 469.45 764.85 205.60 109.55 712.00 292,147,098 1,453,648,601 1,111,477,508 284,029,121 571,995,750 3,768,561,010 292,147,098 1,897,907,446 284,029,121
3,768,561,010 2,138,872,530 1,897,907,446 631,558,654 731,234,846 2,138,872,530

Free-Float

ICICI BANK L 874.05 INFOSYS TECH 1,750.50 LARSEN & TOU 2,666.15 2,835.55 RELIANCE ICICI BANK DEVE L 891.30 2,644.70 HOUSING
INFOSYS TECH 1,779.80 I T C LTD LARSEN & TOU 2,886.20 BHARTI ARTL 2,720.60 HOUSING DEVE STATE BANK O I T C LTD 215.05 ONG CORP BHARTI ARTLLTD 827.60 STATESTL BANK O 1,729.80 TATA ONG CORP 1,028.35 HDFC BANK LT LTD TATACOM STL LTD 845.65 REL HDFC BANK LT 1,508.40 SATYAM COMP REL COM LTD 542.95 BHEL BHEL 1,760.20 HIND UNI LT SATYAM COMP 471.10 HIND UNI LT 250.95 NTPC LTD NTPC LTD 192.70 TCS LTD. TCS LTD. 943.70 RELIANCE ENR 1,394.10 RELIANCE ENR JAIPRAK ASSO JAIPRAK ASSO 269.05 DLF LIMITED 643.80 DLF LIMITED GRASIM INDUS 2,331.85 TATA MOTORS 669.10 GRASIM INDUS HINDALCO IN 180.05 WIPRO LTD. 497.15 TATA MOTORS MAHINDRA & M 678.75 HINDALCO IN RANBAXY 470.05 WIPRO LABO LTD. MAHINDRA & M 770.25 MARUTISUZUK RANBAXY CIPLA LTD. LABO 211.55 AMBUJA CEME 111.40 MARUTISUZUK ACC LTD 743.25

82,839.77 387,564.52 99,065.99 75,117.18 101,803.80 82,267.69 84,319.50 159,841.77 77,272.96 105,830.28
81,042.90 220,047.21 157,070.82 109,247.02 61,708.91 219,950.96

0.50 0.90 1.00 0.85 0.85 0.70 0.90 0.85 0.35 0.70 0.35 0.20 0.45 0.70 0.20

74,555.79 193,782.26 99,065.99 63,849.60 86,533.23 57,587.38 75,887.55 55,944.62 65,682.02

56,730.03 44,009.44 54,974.79 49,161.16 43,196.24 43,990.19

6.50 16.56 8.46 5.57 7.39 5.02 6.48 4.88 5.61 4.15 3.84 4.70
4.20 3.77 4.85

500112
500875 500312 532454 500112 500470 500312

631,558,654

0.45

47,623.63

500180
500470 532712 500180 500376 532712 500103

354,432,920

51,461.89

0.80

41,169.51

3.59

3.76

500696 500376
500696 532555 532555 532540 532540 500390 500390 532532 532532 532868 532868 500300 500570 500300 500440 507685 500570 500520 500440 500359

500103

507685 500520 532500 500359 500087

500425 532500

731,234,846 2,064,026,881 354,432,920 670,479,293 2,064,026,881 489,520,000 489,520,000 2,177,983,566 670,479,293 2,177,983,566 8,245,464,400 8,245,464,400 978,610,498 978,610,498 234,668,582 234,668,582 1,170,563,191 1,170,563,191 1,704,832,680 1,704,832,680 91,674,210 385,490,822 91,674,210 1,227,184,963 1,461,439,242 385,490,822 245,741,813 1,227,184,963 373,227,647

61,836.87 111,261.37 53,462.66 31,740.49 112,066.34 84,417.72

54,536.71 31,586.28
54,656.50 158,148.01 158,890.10 89,782.62 92,351.47 31,259.03 32,715.15 31,494.00 29,416.25 109,757.13 107,472.65 21,377.05 25,793.19 21,451.77 22,095.47 72,655.45 25,781.63 16,679.73 21,297.80 17,543.57

86,165.31

1,461,439,242

500087 500425

500410

CIPLA LTD.

245,741,813 288,910,060 373,227,647 777,291,358 1,522,373,923 288,910,060 187,634,983 777,291,358 1,522,373,923

73,247.33 16,519.99 22,253.30 17,521.17 16,443.60

16,959.25 22,097.29

0.70 0.35 0.80 0.95 0.35 0.35 0.35 0.50 0.95 0.50 0.15 0.15 0.25 0.25 0.70 0.70 0.60 0.60 0.15 0.75 0.15 0.60 0.75 0.70 0.20 0.60 0.80 0.70 0.70

0.20

43,285.81 38,941.48 42,770.13 30,153.47 39,223.22 29,546.20 30,157.86 27,268.35 30,006.97 27,328.25 23,722.20 23,833.51 22,445.66 23,087.87 21,881.32 22,900.60 18,896.40 17,649.75 16,463.57 16,120.90 16,032.79 15,475.91 16,088.82 15,466.83 14,531.09 15,468.98 13,343.78 14,908.46 12,280.50

3.70 3.40 3.65 2.63 3.35 2.58

2.38 2.56
2.33 2.07 2.04 1.97 1.91 1.96 1.61 1.54 1.41 1.41 1.37 1.32 1.40 1.32 1.24 1.35 1.14 1.30 1.05

2.58

1.96

14,649.47

15,981.11 16,677.61

13,945.97

0.50 0.80 0.65 0.70 0.55 0.50 0.60

0.65 0.55

13,215.99 11,126.65 12,264.82 10,688.34 9,327.59 11,048.64 8,367.58 10,387.72 9,172.68

1.28 1.15 0.95 1.07 0.91

0.80 0.96

0.91 0.80 0.70

0.71

TOTAL 500410 ACC LTD

AMBUJA CEME

2,388,066.86 187,634,983 13,359.61

1,170,402.47 0.60 8,015.77

TOTAL

2,345,792.90
CURRENT AVAILABLE SENSEX = 17080.65

1,146,860.00

DATA OF 9TH OF MAY 2008 FOR CALCULATION OF SENSEX

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

CALCULATION OF SENSEX(9

TH

OF MAY 2008)

We all know how to find the free float market capitalization of a company. Free Float Market capitalization = Full Market Capitalization * Free Float Factor Free Float Market capitalization = Market price* No. of shares available for trading. Now ADD these free float market capitalization of all the 30 companies that constitute the Sensex. Now we have the total free float market capitalization for the Sensex. The Sensex value is this value relative to a base period. The Base period is 1978-79 and the Base value is 100. The Free-float market Cap is divided by a number called the index divisor to arrive at the right value of Sensex. OR

Now how to find index divisor

A simple way to find the current index divisor would be calculating the previous day's free-float market cap / previous day's Sensex. Here's an example to calculate the Sensex Free Float Market cap (previous day) ON 8TH OF MAY 2008 = 1170402.47 crores Sensex Value on 8th of may 2008 = 17080.65 index Divisor on 8th of may 2008 = 1170402.47 / 17080.65 = Current Free Float Market Capitalization on 9th of may 2008 = Therefore, current sensex value(9th of may 2008) = Current free float market capitalization(9th of may 2008) / previous days index divisor Current Sensex Value on 9th of may 2008=

68.52212709

crores

1146860 crores

1146860 / 68.52212709

=16737.07
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

ON-LINE COMPUTATION OF THE INDEX During market hours, prices of the index scrips, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time. ADJUSTMENT FOR BONUS, RIGHTS AND NEWLY ISSUED CAPITAL The arithmetic calculation involved in calculating SENSEX is simple, but problem arises when one of the component stocks pays a bonus or issues rights shares. If no adjustments were made, a discontinuity would arise between the current value of the index and its previous value despite the non-occurrence of any economic activity of substance. At the Index Cell of the Exchange, the base value is adjusted, which is used to alter market capitalization of the component stocks to arrive at the SENSEX value. The Index Cell of the Exchange keeps a close watch on the events that might affect the index on a regular basis and carries out daily maintenance of all the 14 Indices.

Adjustments for Rights Issues When a company, included in the compilation of the index, issues right shares, the freefloat market capitalisation of that company is increased by the number of additional shares issued based on the theoretical (ex-right) price. An offsetting or proportionate adjustment is then made to the Base Market Capitalisation (see 'Base Market Capitalisation Adjustment' below).

Adjustments for Bonus Issue: When a company, included in the compilation of the index, issues bonus shares, the market capitalisation of that company does not undergo any change. Therefore, there is no change in the Base Market Capitalisation, only the 'number of shares' in the formula is updated.

Other Issues: Base Market Capitalisation Adjustment is required when new shares are issued by way of

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

conversion of debentures, mergers, spin-offs etc. or when equity is reduced by way of buy-back of shares, corporate restructuring etc. BASE MARKET CAPITALISATION ADJUSTMENT The formula for adjusting the Base Market Capitalisation is as follows:
NEW BASE MARKET CAPITALIZATION = Old Base Market Capitalization* New Base Market Capitalization /Old Market Capitalization

To illustrate, suppose a company issues right shares which increases the market capitalisation of the shares of that company by say, Rs.300 crores. The existing Base Market Capitalisation (Old Base Market Capitalisation), say, is Rs.1730 crores and the aggregate market capitalisation of all the shares included in the index before the right issue is made is, say Rs.4400 crores. The "New Base Market Capitalisation " will then be:
1730 x (4400+300) ------------------------4400 Rs.1847.95 = crores

This figure of Rs. 1847.95 crores will be used as the Base Market Capitalisation for calculating the index number from then onwards till the next base change becomes necessary.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

BOOK BUILDING
Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. The Process:

The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. The Issuer specifies the number of securities to be issued and the price band for orders. The Issuer also appoints syndicate members with whom orders can be placed by the investors. Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. A Book should remain open for a minimum of 5 days. Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes. On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include o o o

Price Aggression Investor quality Earliness of bids, etc.

The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. Allocation of securities is made to the successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.
DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

GUIDELINES FOR BOOK BUILDING

Rules governing book building is covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000. BSE'S BOOK BUILDING SYSTEM

BSE offers the book building services through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks anywhere spanning over 350 Indian cities through over 7000 Trader Work Stations via eased lines, VSATs and Campus LANS

The software is operated through book-runners of the issue and by the syndicate member brokers. Through this book, the syndicate member brokers on behalf of themselves or their clients' place orders.

Bids are placed electronically through syndicate members and the information is collected on line real-time until the bid date ends. In order to maintain transparency, the software gives visual graphs displaying price v/s quantity on the terminals.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.

INITIAL PUBLIC OFFERINGS Corporates may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner: a. 100% of the net offer to the public through the book building route. b. 75% of the net offer to the public through the book building process and 25% through the fixed price portion. Difference between shares offered through book building and offer of shares through normal public issue: Features Pricing Fixed Price process Price at which the securities are offered/allotted is known in advance to the investor. Book Building process Price at which securities will be offered/allotted is not known in advance to the investor. Only an indicative price range is known. Demand Demand for the securities offered Demand for the securities offered can be is known only after the closure of known everyday as the book is built. the issue Payment Payment if made at the time of subscription wherein refund is given after allocation. Payment only after allocation.

DEPT. OF BUSINESS AND FINANCIAL STUDIES. UNIVERSITY OF KASHMIR.