Write short notes on the following: Steps to calculate SENSEX

SENSEX, the benchmark index of the Bombay Stock Exchange (BSE), is calculated using the free-float market capitalization method. The key steps involved are: Market Capitalization: The market capitalization of each constituent company in the SENSEX is calculated by multiplying the number of shares issued by the company with its current stock price. Free-Float Market Capitalization: BSE determines a 'Free-Float factor' for each company. This factor represents the proportion of shares available for public trading (i.e., not held by promoters, government, or other locked-in entities). The free-float market capitalization is then calculated by multiplying the market capitalization by this free-float factor. Base Index and Ratio & Proportion: The SENSEX is based on a base index value (e.g., 100 for the base year 1978-79). The current index value is determined using a ratio and proportion method, comparing the current aggregate free-float market capitalization of the 30 constituent companies to the aggregate free-float market capitalization during the base period, scaled by the base index value. This helps to determine the Sensex value.