Stock Indices

•      An index is a summary measure that indicates changes in value(s) of a variable or a set of variables over a time or space.

•      The stock (equity) index uses a set of stocks that are representative of the whole market, or a specified sector, to measure the change in overall behaviour of the markets or sector over a period of time.

•      Functions of an Index

–     To serve as a barometer of the equity market

–     To serve as a benchmark for portfolio of stocks

–     To serve as underlying for futures and options contracts

•      Methodologies for Calculating the Index

     1. Full market capitalisation method

     2. Free-float market capitalisation method

Major Indices in India are: Sensex and S&P CNX Nifty

•      The BSE Sensitive Index (Sensex) of equity share prices was launched in 1986. It comprises 30 shares and its base year is 1978—79. The major criteria for selection of a scrip in the Sensex is large market capitalisation.

–     Besides this criterion, other criteria are companies history, track record, industry/sector representation, number of trades, average value of shares, number of transactions per day as a percentage of total number of outstanding shares.

–     The scrip selection is also based on a balanced representation of the industry, leadership position in industry, continuous dividend-paying record, and track record of promoters.

•      S&P CNX Nifty (Nifty) is a 50-stock index comprising the largest and the most liquid stocks from about 25 sectors in India. The index was introduced in 1995 by the National Stock Exchange (NSE). NSE maintained it till July 1998, after which the ownership and management rights were transferred to India Index Services & Products Ltd. (IISL).

–     IISL is jointly promoted by NSE, the country’s leading stock exchange and The Credit Rating and Information Services of India Ltd. (CRISIL), the leading credit rating agency in India.

–     IISL has a licensing and marketing agreement with Standard & Poor’s (S&P), the leading index services provider in the world.

–     IISL also maintains over 80 indices comprising broad based benchmark indices, sectoral indices and customised indices.

Other BSE Indices

•      BSE 100

•      BSE 200

•      Dollex

•      BSE 500

•      BSE Midcap

•      BSE Smallcap

•      Sectoral Indices of BSE i.e. Auto, C Goods, C Durables, FMCG, Healthcare, IT, Metal, Oil & Gas, PSU, Bankex, Teck

Other NSE Indices

•      CNX Nifty Junior

•      CNX 100

•      S&P CNX 500

•      CNX Midcap

•      S&P CNX Defty

•      CNX Midcap200

•      Sectoral Indices of NSE i.e. IT, Bnak, FMCG, PSE, MNC, Service Sector, Industry, Energy, Pharma  and other indices