INDIAN STOCK INDICES

SUBMITTED TO DEPARTMENT MGT & COMMERCE

SUBMITTED BY HILAL AHMAD

ROLL NO. 5180

INTRODUCTION A STOCK MARKET INDEX IS A MEASURE OF THE

RELATIVE VALUE OF A GROUP OF STOCK IN NUMERICAL TERMS.AS THE STOCKS WITHIN AN INDEX CHANGE VALUE,THE INDEX VALUE CHANGE

A STOCK MARKET INDEX IS CREATED BY SELECTING A GROUP OF STOCKS THAT ARE REPRESENTATIVE OF THE WHOLE MARKET.

IN INDIA CAPITAL MARKET, TWO INDECES PLAY A VITAL ROLE IN REPRESENTING THE WHOLE SECTOR. THESE ARE S&P BSE SENSEX AND CNX NIFTY.

WHAT IS S&P BSE SENSEX SENSEX IS INDEX.INDEX IS BASICALLY AN

INDICATOR. IT WAS LAUNCHED IN 1986. IT WAS CALCULATED ON A “MARKET

CAPITALISATION WEIGHTED METHODOLOGY” THE BASE YEAR OF SENSEX WAS TAKEN AS 1978-

79. BASE YEAR VALUE = 100 NUMBER OF SCRIPS=30 SINCE SEPTEMBER 2003 SENSEX IS CALCULATED

ON A FREE-FLOAT MARKET CAPITALISATION METHODOLOGY.

HOW TO CALCULATE BSE SENSEX

IT IS CALCLATED USING FREE FLOAT MARKET CAPITALISATION METHOD

(TO UNDERSTAND HOW THE SENSEX IS CALCULATED WE NEED TO UNDERSTAND WHAT THE TERM FREE FLOAT MARKET CAPITALISATION MEAN BUT BEFORE WE NEED TO UNDERSTAND WHAT IS MARKET CAPITALISATION)

WHAT IS MARKET CAPITALISATION MARKET CAPITALISATION IS SIMPLY THE

WORTH OF A COMPANY IN TERMS OF SHARES.

TO CALCULATE THE MARKET CAPITALISATION OF A PARTICULAR COMPANY SIMPLY MULTIPLY THE “CURRENT SHARE PRICE BY THE NUMBER OF SHARES ISSUED BY THE COMPANY”

WHAT IS FREE FLOAT MARKET CAPITALISATION OPEN MARKET SHARES THAT ARE FREE

FROM TRADING BY ANYONE ARE CALLED THE FREE FLOAT SHARES.

ACCORDING TO BSE ANY SHARES THAT DO NOT FALL UNDER THE FOLLOWING CRITERIA CAN NOT BE CLASSIFIED TO BE OPEN MARKET SHARES-

HOLDING OF FOUNDERS/DIRECTORS/ GOVT HOLDING AS A PROMOTER HOLDING THROUGH FDI

What is free float? THE FREE FLOAT FACTOR IS A VALUABLE NUMBER. IF WE MULTIPLY FREE FLOAT FACTOR WITH THE

MARKET CAPITALIZATION OF THE COMPANY WE WILL GET FREE FLOAT MARKET CAPITALISATION.

EXAMPLE SUPPOSE,FOR A FREE FLOAT MARKET

CAPITALISATION IS RS. 1000 CRORE, THE SENSEX VALUE IS 4000, THEN FOR A FREE FLAOT MARKET CAPITALISATION OF RS. 1500 CRORE. THE SENSEX WILL BE

1500/1000*4000=6000 SO. THE SENSEX VALUE WILL BE 6000,IF

THE FREE FLOAT MARKET CAP COMES TO RS. 1500CR.

NIFTY NIFTY IS A MAJOR STOCK INDEX IN INDIA INTRODUCES

BY NSE(NATIONAL STOCK EXCHANGE) NIFTY IS COINED FROM 2 WORDS “NATIONAL & FIFTY” THE BASE YEARIS TAKEN AS 1995 THE BASE VALUE IS SET TO 1000 NIFTY IS CALCULATED ON 50 STOCKS. THE SELECTION CRITERIA FOR THE 50 STOCKS ARE

ALSO SAME TO THE METHODOLOGY ADOPTED BY SENSEX

THANK YOU