The important companies are pre-packaged and continuously monitored to give you this information. This pre-packaged market sentiment indicator is called the ‘Stock market Index.’ (View Highlight)
The S&P BSE Sensex represents the Bombay stock exchange, and the Nifty 50 represents the National Stock exchange (View Highlight)
there is the Nifty Bank Index (Bank Nifty), which is quite popular. Bank Nifty represents the banking sector as a whole. (View Highlight)
S&P stands for Standard and Poor’s, a global credit rating agency. S&P has the technical expertise in constructing the index they have licensed to the BSE. Hence the index also carries the S&P tag. NSE itself maintains the indices via a related company called NSE Indices Limited. (View Highlight)
the Index is a composition of many stocks from different sectors representing the economy’s state. (View Highlight)
To include a stock in the index, it should qualify for certain criteria. Once qualified as an index stock, it should continue to qualify on the stated criteria. If it fails to maintain the criteria, the stock gets replaced by another stock that qualifies the prerequisites. (View Highlight)
Based on the selection procedure, the list of stocks is populated. Each stock in the index should be assigned a certain weightage. Weightage, in simpler terms, defines how much importance a certain stock in the index gets compared to the others. (View Highlight)
There are many ways to assign weights, but the Indian stock exchange follows a free-float market capitalization method. The weights are assigned based on the company’s free-float market capitalization. The larger the market capitalization, the higher the weight. (View Highlight)
ree float market capitalization is the product of the total number of shares outstanding in the market and the stock price.
For example, company ABC has 100 shares outstanding in the market, and the stock price is at 50, then the free-float market cap of ABC is 100*50 = Rs.5,000 (View Highlight)
