Sensex calculation....!!

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Let me understand you through a small example

Imagine that you have only one share in the index and cost of the share is 100 so whenever there is change the index also changes with 100% correlation. 

If it raises to 110 the index will also raise by 10. 

If you have two shares of different companies one is Rs.100 and the other is 110 then the index will be calculated based on a weighted average.

It will be 105.

In a complex index like the SENSEX there will no of different companies having different numbers and rates. the average is worked out and the change in the base figure will be shown.

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