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sensex has base figure of———

sensex has base figure of---------

Looking for the answer to the question below related to Financial Management ?

sensex has base figure of———

 Options:

A. 100
B. 200
C. 500
D. 1000

The Correct Answer Is:

  • A. 100

The correct answer is A. 100. The base figure of 100 for the Sensex, also known as the Sensex base year, is a significant historical reference point that helps investors and analysts understand how the index has performed over time. Let’s explore in detail why this answer is correct and why the other options are not:

A. 100:

The base figure of 100 for the Sensex is indeed the correct historical reference point. When the Bombay Stock Exchange (BSE) introduced the Sensex in 1979, it was set with a base value of 100. This means that the index was initially calculated to have a value of 100 at the start, which serves as a benchmark or starting point for tracking the performance of the Indian stock market.

The base figure of 100 is used to calculate the index’s movements over time. When the Sensex goes up, it means the overall market has performed better than it did when the index was initially set at 100. Conversely, when the Sensex goes down, it indicates a relative decline in the market’s performance compared to the base year.

Now, let’s examine why the other options are not correct:

B. 200:

Setting the Sensex’s base figure at 200 would be an arbitrary choice and not historically accurate. The BSE chose 100 as the base value when they introduced the index in 1979, and this reference point has been maintained since then to provide a consistent basis for measuring market performance over time.

Changing the base value to 200 or any other number would not be meaningful without a compelling reason, and it would disrupt the historical continuity of the index.

C. 500:

Similarly, choosing 500 as the base figure for the Sensex would also be arbitrary and lacks historical relevance. The use of 100 as the base figure is deeply rooted in the index’s history and serves as a widely recognized and accepted benchmark for assessing the Indian stock market’s performance. Changing it to 500 would not provide any additional benefit in terms of understanding market movements.

D. 1000:

Setting the base figure at 1000 would again be a random choice and not reflective of the index’s historical development. The use of 100 as the base figure is consistent with the index’s original design and purpose, which is to measure the relative performance of the Indian stock market over time.

Changing it to 1000 would not alter the underlying dynamics of the index but would create confusion and disrupt historical comparisons.

In summary, the base figure of 100 for the Sensex is the correct and historically established reference point that has been used since its inception in 1979. This base value allows investors, analysts, and market participants to track and assess the performance of the Indian stock market over decades in a meaningful and consistent way.

It provides a valuable historical context for evaluating market trends, making investment decisions, and understanding how the market has evolved over time. Changing this base value to other arbitrary numbers would not enhance the index’s utility but would introduce unnecessary complexity and ambiguity.

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