Bankex vs Sensex: Key Differences

If you are investing in stocks, you must have heard about the terms such as Sensex and Bankex. You must have thought that, but what does it mean, and how can it impact your portfolio’s performance? Understanding these benchmark indices with clarity can enhance your market knowledge and help you make more informed and data-driven investment decisions.

In today’s article, we will give you an overview of Bankex and Sensex along with the key differences among them.

What is Bankex?

Bankex is an index of the Bombay Stock Exchange that tracks the performance of key banking companies that are listed on the Bombay Stock Exchange. The index was created with an objective to track how the Indian banking sector is performing, because banking companies play a vital role in the growth of the economy. The index can include banks from both the private and public sectors. The performance and movement of this index are primarily dependent on various factors such as interest rate in the economy, loan demand, government policies, etc.

Launch Date of Bankex: The Bankex index was launched in June 2003.

Features of Bankex

The key features of Bankex are as follows:

• Sectoral Index: This is a dedicated sectoral index launched by BSE to reflect the performance of the banking sector.
• Leading Banks: This index consists of leading banks listed on the Bombay Stock Exchange that have the largest market capitalisation and liquidity.
• Sensitive to RBI Interest Rate: The Bankex index is highly sensitive to changes in the RBI interest rate, liquidity, and its policy decisions.
• Highly Volatile: As this index belongs to the sectoral category, any investment in this index carries high risk.

Calculation of Bankex Value

Let’s understand how the value of Bankex is calculated through an example. Similar to the value of Sensex, the value of Bankex is also calculated based on the free-float market capitalisation. It includes only those shares which are freely available for trade. The formula to calculate Bankex Value is as follows:

Bankex Value = Total free-float market capitalisation of Bankex companies to be included/Index Divisor

If there are 10 banks available to be included in the Bankex, first, we need to calculate their free-float market cap, and then we put the values in the formula.

The total market cap of all the 10 banking companies are 1 lakh crores and the index divisor is 10.

Then the calculation will be as follows:

100000/10

= 10000

Hence, the Bankex value will be 10000 points.

What is Sensex?

Sensex is often known as the Sensitive Index, and is a benchmark of the Bombay Stock Exchange. It is considered one of the key indicators of the Indian stock market. The Sensex consists of the 30 largest stocks listed on the Bombay Stock Exchange based on market capitalisation and is included from various sectors. The Sensex reflects the performance of the overall Indian Stock Market, and it is calculated based on free-float market capitalisation.

Launch Date of Sensex: The Sensex was launched in 1986.

Features of Sensex

The key features of Sensex are as follows:

• Performance Benchmark: Sensex is considered the performance benchmark of the Indian Stock Market.
• Component: The Sensex consists of the 30 largest companies listed on the Bombay Stock Exchange.
• Diversification: The stocks of the Sensex include companies from different sectors, including banking, technology, etc.
• Real Time Calculation: The value of Sensex is calculated on a real-time basis even during the market hours, through which an investor can easily track the performance in real-time.

Calculation of Sensex Value

The Sensex value is calculated based on free-float market capitalisation. It includes only those shares that are available for trade in public. The free-float market capitalisation of all the companies added is divided by the index divisor.

Example: Let’s understand the calculation of Sensex through an example. As Sensex consists of 30 companies and the free float market capitalisation of these companies is around ₹200 lakh crore, and the index divisor is 2,500.  Now, let’s calculate how the value of this index is calculated.

The formula to calculate the Sensex value will be as follows:

Sensex = Total Free Float Market Capitalisation of all 30 companies/Divisor of Index.

Sensex = 20000000/2.5

Sensex Value will be 80,000 points.

Read Also: BSE Sensex vs BSE All Cap? A Comparative Study

Difference Between Bankex and Sensex

The key difference between Bankex and Sensex is as follows:

Particulars	Sensex	Bankex
Overview	Benchmark of Bombay Stock Exchange	Index for Banking Sector of BSE
Launch Date	Sensex was launched on 1st Jan 1986.	Bankex was launched on 23rd June 2003.
Represent	Sensex is a broad market index.	It is a sector-specific index.
Sector	Their constituents consist of different sectors such as IT, banking, pharma, etc.	Bankex includes shares only from the banking sector.
Number of Companies	Sensex includes 30 companies.	Bankex includes 14 leading companies from the banking sector.
Usage	It was used to check the overall market sentiment.	Bankex was specifically used to track the movement of the banking sector.
Investment Risk	Investment in the Sensex carries lower risk because of sectoral diversification.	Investment in Bankex carries a higher risk as its performance depends on a single sector.
Base Year	The base year of Sensex is 1978-79.	The bankex base year is 2002.
Base Value	Sensex base value is 100	Its base value is 1000
Volatile	Sensex is less volatile.	It is highly volatile in nature.
Interest Rate Impact	There is a minimum impact of the interest rate change on the Sensex.	This index is highly impacted by the change in interest rates by the RBI.

Why Bankex and Sensex Move Differently

The key reason why Bankex and Sensex move differently is as follows:

• Composition: The key reason why Bankex and Sensex move differently is that both have different compositions. Sensex consists of 30 companies, while Bankex have 14 companies.
• Sectoral Performance: The Sensex have companies from different sectors that include IT, banking, pharma, etc. Bankex, on the other hand, has companies only from the banking sector. 
• Weightage of Stocks: Both Bankex and Sensex are based on free-float market capitalisation, but it has different weightage of stocks. Therefore, weak performance in Sensex composition can be compensated by performance of other sectors such as IT, Pharma, etc.
• Interest Rate Changes: The performance of Bankex is particularly dependent on the interest rate of the economy. But the Sensex might show a slight reaction to the changes announced by the RBI.

Why One Should Track Both Sensex and Bankex

The key reason why one should track both Sensex and Bankex is as follows:

• Understand the Complete Trend: Combining the tracking of both Bankex and Sensex allows an investor to understand the complete market trend.
• Identifying Opportunity: By tracking both Bankex and the Sensex index, a trader can identify the opportunities in different market conditions, which stocks are down and have higher growth potential.
• Spot Early Market Movements: As the performance of banking sectors is directly linked with the interest rate in the economy, credit growth, etc. Comparing such signals with the market movements helps an investor in informed decision.

Read Also: NSE Case Study

Conclusion

On a concluding note, if you are an active trader and invest regularly, then you must understand the correlation between Bankex and Sensex to make a profitable trade. Both of the indices have their own importance. Sensex shows you the bigger picture of the market, whereas Bankex shows how a particular banking sector is performing. Therefore, following both indices will allow an investor to make an informed decision. But one should consult their investment advisor before making any investment decision.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
1	Physical Settlement in Futures and Options
2	Types of Futures and Futures Traders
3	Option Chain Analysis: A Detail Guide for Beginners
4	Option Buying vs Option Selling
5	Bullish Options Trading Strategies Explained for Beginners
6	What Is Day Trading and How to Start With It?
7	Nifty Weekly Options Strategy for Beginners
8	Types of Trading Accounts
9	SEBI F&O New Rules
10	Difference Between Options and Futures