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Stock Market Indexes Research Team | Posted On Tuesday, April 21,2009, 01:32 PM

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Stock Market Indexes



Stock indexes are a statistical average of a particular stock exchange or sector. Indexes are composed of stocks which have some of the things in common, they are all part of the same exchange; either they are part of the same industry; or they represent companies of a certain size or location.

There are numerous diverse stock indexes, the most common in India are Sensex and NIFTY. Stock indexes give an on the whole viewpoint about the economic health of a particular industry or stock exchange.There are numerous diverse ways to calculate indexes. An index based exclusively on the price of stocks is called a 'price weighted index'. This kind of index does not take into consideration the significance of any particular stock or the size of the company. An index which is 'market value weighted', alternatively, takes into account the size of the companies. That way, price shifts of small companies have less control than those of larger companies. Another kind of index is the 'market-share weighted' index. This kind of index is based on the number of shares rather instead of their total value.

Additionally as giving an in general grade to a particular economy, indexes can also be an investment instrument. Mutual funds based on indexes are called as 'passively managed mutual funds' and have been shown to constantly outperform managed funds. Mutual funds based on an index simply replicate the holdings where the index is based on. Thus if the Sensex increases by 1% the fund based on the Sensex also increases by the same amount. This has the benefit of lower costs for research and transactions – savings that can be passed on to the investor who take part in these funds.

The Big Indexes

The Dow Jones Industrial Average is one among the best-known indexes in the United States. It follows the stock movements of 30 of the most leading companies in America including General Electric, Coca Cola and General Motors. It is a 'price-weighted average' index, hence giving more control over more expensive stocks. Some analysts consider that the price-weighting does not give an accurate picture of stock market movements and that 30 companies are not sufficient to form an accurate assessment.

The S&P 500 Index is purely based on 500 United States corporations. These companies are carefully chosen to represent a broad range of economic activity. It is among the second in influence after the Dow Jones and is felt to be an accurate forecaster of the state of the United States economy.

Outside of the United States the most influential index is the FTSE 100 Index. This is based on 100 of the major companies listed on the London Stock Exchange. It is an indicator of the British economy and is one among the biggest indexes in Europe. Other significant non-US indexes are the CAC 40 from France and the Nikkei 225 from Japan.

BSE Index

The different categories under BSE Index include :

  • BSE 30 - Sensex,
  • BSE 100 - Natex,
  • BSE IT - Information Technology,
  • BSE CG - Capital Goods,
  • BSE FMCG - Fast Moving Consumer Goods,
  • BSE CD - Consumer Durables,
  • BSE HC - HealthCare

Among the 23 stock exchanges in the India, Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the principal, with over 6,000 stocks listed. The BSE amounts for over two thirds of the total trading volume in the country. Commenced in 1875, the exchange is also the oldest in Asia. Of the 22 Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the opportunity of getting permanent recognition ab-initio.

NSE Index

The different categories under NSE Index include :

  • S&P CNX Nifty
  • S&P CNX Defty
  • S&P CNX 500
  • CNX Nifty Jr.
  • CNX MIDCAP 200
  • CNX IT
  • NSE Gainers
  • NSE Losers
  • Index Movement

The National Stock Exchange of India Limited has origin in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which suggested promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal balance. Based on the recommendations, NSE was promoted by leading Financial Institutions at the request of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in

The National Stock Exchange (NSE) is situated in Bombay. It is India's first debt market. It was established in 1993 to encourage stock exchange development through system modernization and competition. It opened for trading in mid-1994. It was newly accorded recognition as a stock exchange by the Department of Company Affairs. The instruments traded are in NSE Index includes treasury bills, government security and bonds issued by public sector companies. the country.

NSE Group

  • 1. India Index Services & Products Ltd. (IISL)
  • 2. National Securities Clearing Corporation Ltd. (NSCCL)
  • 3. NSE.IT Ltd.
  • 4. National Securities Depository Ltd. (NSDL)
  • 5. DotEx International Limited

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