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NSE Indices
IndexCurrentPrevious% ChangeS & P CNX Nifty3641.13770.553.43%CNX Nifty Junior6458.556634.852.66%CNX IT5100.55314.054.02%Bank Nifty5039.055251.554.05%CNX 1003519.353640.353.32%

World Markets
IndexCurrentPrevious% ChangeNYSE Cornposite8926.889120.932.13%NASDAQ Composite2350.572402.292.15%DOW Jones IA1207612318.61.97%S & P 5001377.951406.62.04%Nikkei 22516676.917178.82.92%

The above figures are taken from the website of National Stock Exchange of India. They illustrate the movement of NSE stock indices as well as world stock indices on the date indicated.

What do you mean by a stock index? How is it calculated?

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Solution

The stock index refers to the index used to capture the movement of the stock market. It is a barometer which measures overall market trend through a set of stocks which are representatives of the market. An ideal index must represent changes in the prices of securities and also show the price movement of different classes of shares. A stock exchange selects a few most commonly traded shares. Then, the market price of these shares is found out by taking an average of highest price and the lowest price on a day.

Then to find out the market capitalisation, the outstanding number of particular shares is multiplied by the price.

Most of the stock market uses the following three methods of calculating stock index :

(i) Price-weighted index: An index reflecting the sum of the prices of the sample share in a certain year/month/week/day with reference to the base year.

(ii) Equal-weighted index: An index reflecting the simple arithmetic average of the price relatives of a sample of shares in a certain period with reference to the base year.

(iii) Value weighted index: It is an index reflecting the aggregate market capitalisation of the sample shares in a certain period in relation to a base year.


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