The BSE Sensex is a value-weighted index composed of 30 companies with the base April 1979 = 100. The set of companies in the index is essentially fixed. These companies account for around one-fifth of the market capitalisation of the BSE.
The BSE Sensex portfolio has grown by more than four times from January 1990 to today. We can use information from April 1979 onwards in estimating the long-run rate of return on the BSE Sensex, this comes to 0.52% per week (continuously compounded) with a standard deviation of 3.67%. This translates to 27% per annum, which translates to roughly 18% per annum after compensating for inflation.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.