Not too much sense, but lots of sex — read excitement. The Bombay Stock Exchange Sensitive Index or Sensex is the country’s oldest stockmarket index, and is still the most cited statistic when talking about the India growth story. True to its name, Sensex is the most widely used indicator of market sentiment, very much like the Dow Jones Industrial Average, or Dow for short, is for Wall Street. And for the last year, its rise has generated considerable excitement.

The National Stock Exchange (NSE) has its own Nifty Fifty; a nifty title for an index too. The constituents of the BSE Sensex — with the exception of one — are a subset of the Nifty’s 50 stocks; but the resemblance between the two stops there. In the US, the popular Dow Jones index is not a market capitalisation index, but a simple average of the prices of the constituents of the index. It is an evenly-weighted index where all stocks are assigned the same weight regardless of the size of the market cap. But the other popular index, S&P 500, is calculated on the total market cap method and the one that most index funds and exchange traded funds (ETFs) use.

Both the Sensex and the Nifty are market cap-weighted indices. The Sensex uses the concept of free float market cap — that proportion of the total market capitalisation that does not include the promoters’ share — whereas the Nifty is a full market cap index. In other words, if the market cap of the 29 common stocks included in the two indices were taken, that of the Sensex would be smaller than that of the Nifty.

Leaving out the promoters’ holding is a contentious issue. “Is the promoter holding fixed?” asks Ajay Shah, economist and advisor to the finance ministry. “Not really. They respond to prices like you and me. They are a part of the normal market process.” Shah is uncomfortable with the idea of the promoters being “up and there while the rest are in”.