question_answer 26)

Paragraph NSE Indices  

Index	Current	Previous	% Change
S & P CNX Nifty	3641.1	3770.55	-3.43%
CNX Nifty Junior	6458.55	6634.85	-2.66%
CNX IT	5100.5	5314.05	-4.02%
Bank Nifty	5039.05	5251.05	-4.05%
CNX 100	3519.35	3640.35	-3.32%

World Markets  

Index	Current	Previous	% Change
NYSE Composite	8926.82	9120.93	-2.13%
NASDAQ Composite	2350.57	2402.29	-2.15%
Dow Jones IA	12076	12318.6	-1.97%
S & P 500	1377.95	1406.6	-2.04%
Nikki 225	16676.9	17178.8	-2.92%

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?

Answer:

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. Most of the stock market uses the following 3 methods of calculating 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 a 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 base year. (iii) Value Weighted Index It is an index reflecting the aggregate market capitalization of the sample shares in certain period in relation to base year.