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Understanding Market Indices and Nifty 50

This document summarizes key information about market indices: Market indices track segments of the financial market through hypothetical portfolios of securities. They are calculated based on the prices of their underlying holdings, which can be weighted by factors like market capitalization. Popular indices like the Sensex and Nifty 50 track the Indian stock market, while indices also exist for specific countries, regions, exchanges, and market sectors globally. Market indices are important benchmarks for investment performance and developing index funds, though investors cannot invest directly in an index itself. Methodologies for calculating indices include market capitalization weighting and revenue weighting.

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Akanksha Mukkawar
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Topics covered

  • Market Index,
  • Index Methodology,
  • FTSE Global Equity Index Serie…,
  • Volatility Weighting,
  • Modified Capitalization Weight…,
  • Investment Holdings Portfolio,
  • Market Segments,
  • Stock Indexes,
  • Market-cap Weighting,
  • Investment Analysis
120 views8 pages

Understanding Market Indices and Nifty 50

This document summarizes key information about market indices: Market indices track segments of the financial market through hypothetical portfolios of securities. They are calculated based on the prices of their underlying holdings, which can be weighted by factors like market capitalization. Popular indices like the Sensex and Nifty 50 track the Indian stock market, while indices also exist for specific countries, regions, exchanges, and market sectors globally. Market indices are important benchmarks for investment performance and developing index funds, though investors cannot invest directly in an index itself. Methodologies for calculating indices include market capitalization weighting and revenue weighting.

Uploaded by

Akanksha Mukkawar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

Topics covered

  • Market Index,
  • Index Methodology,
  • FTSE Global Equity Index Serie…,
  • Volatility Weighting,
  • Modified Capitalization Weight…,
  • Investment Holdings Portfolio,
  • Market Segments,
  • Stock Indexes,
  • Market-cap Weighting,
  • Investment Analysis

Market Indices

Akanksha Mukkawar
Market Index
• A market index is a hypothetical portfolio of investment holdings that
represents a segment of the financial market.
• The calculation of the index value comes from the prices of the underlying
holdings.
• Some indexes have values based on market-cap weighting, revenue-
weighting, float-weighting, and fundamental-weighting.
• Investors follow different market indexes to gauge market
movements.
• Two popular stock indexes for tracking the performance of the Indian
market are Sensex and Nifty 50.
• There are different stock indexes for different market all over the
world. Those particular index reflect the economic situation of that
country.
• Indexes measure the performance of a set of equity securities over
time.
Importance of Market Indexes
• Market indexes provide a broad representative portfolio of
investment holdings.
• Investors cannot invest directly in an index, so these portfolios are
used broadly as benchmarks or for developing index funds.
• managers using them as the basis for creating investable index
funds.
• Each index has its own methodology which is calculated and
maintained by the index provider.
• Some investors will allocate their investment portfolios based on
the returns or expected returns of certain segments.
• While analyzing return of any stock the analyst also compare that
stock with the index in order to track the performance of the stock.
Methodology of Index
• Market-cap weighting
• Revenue-weighting
• Float-weighting
• Modified Capitalisation Weighted
• Equal Weighing
• Factor Weighting
• Volatility Weighting
• Fundamental-weighting.
Types of Indexes
• Country Coverage - S&P 500 Index in the United States,
the Nikkei 225 in Japan, the NIFTY 50 in India
• Regional Coverage - FTSE Developed Europe Index, and
the FTSE Developed Asia Pacific Index.
• Global Coverage - FTSE Global Equity Index
Series includes over 16,000 companies.
• Exchange-based Coverage - NASDAQ-100
• Sector-based coverage – Nifty IT, Nifty Bank
Nifty 50
• The NIFTY 50 is the flagship index on the National Stock Exchange
of India Ltd. (NSE).
• It includes 50 of the approximately 1600 companies traded (listed
& traded and not listed but permitted to trade) on NSE.
• It uses float-adjusted market-capitalization weighted index for
India.
• It represents about 65% of the total float-adjusted market
capitalization of the (NSE).
• The index is reconstituted semi-annually considering 6 months
data ending January and July respectively.
References
• https://www.investopedia.com/terms/m/marketindex.asp
• https://commercestudyguide.com/methodologies-calculating-stock
-market-index
/
• https://en.wikipedia.org/wiki/Stock_market_index
• https://www1.nseindia.com/content/indices/Method_Nifty_50.pdf
Thank You

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