Basics of Stock Market 13: What are stock market indexes, why are they important?
- Aniston Antony
- Nov 1, 2021
- 5 min read
An index is a method to track the performance of a group of assets in a standard way. Indexes typically measure the performance of a basket of securities/stocks intended to replicate a certain area of the market. It is a weighted average representative sample of the market.
Table of contents
What is an index?
Like in the last article we have seen the consumer price index (CPI). This is a basket of goods and services represented to show what a typical consumer will buy over a given time period. By seeing the CPI, we can know has the prices increased or decreased over the same period of time.
In the stock market, it is used to measure the performance of a basket of stocks. If we are talking about the Indian market, Nifty 50 is used to measure the performance of the top 50 stocks in India. These 50 stocks are listed based on the free-float capitalization method. Let’s take a deep dive into 2 of the most famous indexes in India.
NSE- Nifty 50
The Nifty 50 index was launched on 22 April 1996 and is one of the many stock indices of Nifty. The NIFTY 50 is a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. Nifty 50 is owned and managed by NSE Indices, which is a wholly-owned subsidiary of the NSE Strategic Investment Corporation Limited.
The NIFTY 50 index covers 13 sectors (as of 30 April 2021) of the Indian economy and offers investment managers exposure to the Indian market in one portfolio. The NIFTY 50 Index gives a weightage of 39.47% to financial services, 15.31% to Energy, 13.01% to IT, 12.38% to consumer goods, 6.11% to Automobiles, and 0% to the agricultural sector.
The base period for the NIFTY 50 index is 3 November 1995, which is launched after one year of operations of the National Stock Exchange Equity Market Segment. The base value of the index has been set at 1000 and a base capital of ₹ 2.06 trillion.
These are the stocks in Nifty 50 as of April 2021.
Company Name | Symbol | Sector |
|---|---|---|
Adani Ports | ADANIPORTS | Infrastructure |
Asian Paints | ASIANPAINT | Consumer Goods |
Axis Bank | AXISBANK | Banking |
Bajaj Auto | BAJAJ-AUTO | Automobile |
Bajaj Finance | BAJFINANCE | Financial Services |
Bajaj Finserv | BAJAJFINSV | Financial Services |
Bharti Airtel | BHARTIARTL | Telecommunication |
Bharat Petroleum | BPCL | Energy - Oil & Gas |
Britannia Industries | BRITANNIA | Consumer Goods |
Cipla | CIPLA | Pharmaceuticals |
Coal India | COALINDIA | Metals |
Divi's Laboratories | DIVISLAB | Pharmaceuticals |
Dr. Reddy's Laboratories | DRREDDY | Pharmaceuticals |
Eicher Motors | EICHERMOT | Automobile |
Grasim Industries | GRASIM | Cement |
HCL Technologies | HCLTECH | Information Technology |
HDFC | HDFC | Financial Services |
HDFC Bank | HDFCBANK | Banking |
HDFC Life | HDFCLIFE | Financial Services |
Hero MotoCorp | HEROMOTOCO | Automobile |
Hindalco Industries | HINDALCO | Metals |
Hindustan Unilever | HINDUNILVR | Consumer Goods |
ICICI Bank | ICICIBANK | Banking |
IndusInd Bank | INDUSINDBK | Banking |
Infosys | INFY | Information Technology |
Indian Oil Corporation | IOC | Energy - Oil & Gas |
ITC Limited | ITC | Consumer Goods |
JSW Steel | JSWSTEEL | Metals |
Kotak Mahindra Bank | KOTAKBANK | Banking |
Larsen & Toubro | LT | Construction |
Mahindra & Mahindra | M&M | Automobile |
Maruti Suzuki | MARUTI | Automobile |
Nestlé India | NESTLEIND | Consumer Goods |
NTPC | NTPC | Energy - Power |
Oil and Natural Gas Corporation | ONGC | Energy - Oil & Gas |
Power Grid Corporation of India | POWERGRID | Energy - Power |
Reliance Industries | RELIANCE | Energy - Oil & Gas |
State Bank of India | SBIN | Banking |
SBI Life Insurance Company | SBILIFE | Financial Services |
Shree Cements | SHREECEM | Cement |
Sun Pharmaceutical | SUNPHARMA | Pharmaceuticals |
Tata Motors | TATAMOTORS | Automobile |
Tata Steel | TATASTEEL | Metals |
Tata Consultancy Services | TCS | Information Technology |
Tata Consumer Products | TATACONSUM | Consumer Goods |
Tech Mahindra | TECHM | Information Technology |
Titan Company | TITAN | Consumer Durables |
UltraTech Cement | ULTRACEMCO | Cement |
United Phosphorus Limited | UPL | Chemicals |
Wipro | WIPRO | Information Technology |
Fact:
On 12th March 2020, the index fell by 868 points which is 8.30%. This was due to the COVID-19 pandemic after WHO declared it a pandemic.
On 23rd March 2020, the index again fell by 1135 points which is 12.98%. This was due to the panic-driven in the country due to the COVID-19 pandemic.
On 7th April 2020, the index bounced back and gained 708 points which is 8.76%. This was due to the positive news that infection numbers were declining in some of the worst affected areas around the world.
Nifty Next 50 Index
There is also an index called NIFTY NEXT 50, also called NIFTY junior. It is an index of 50 companies whose free-float market capitalization comes after that of the companies in NIFTY 50. NIFTY's Next 50 constituents are thus potential candidates for future inclusion in NIFTY 50.
Nifty Next 50 constituents as of October 2021.
Company name | Symbol | Sector |
|---|---|---|
ACC | ACC | Cement |
Adani Green Energy | ADANIENT | Metals |
Adani Green Energy | ADANIGREEN | Energy - Power |
Adani Transmission | ADANITRANS | Energy - Power |
Ambuja Cements | AMBUJACEM | Cement |
Apollo Hospitals | APOLLOHOSP | Healthcare |
Aurobindo Pharma | AUROPHARMA | Pharmaceuticals |
Avenue Supermarts | DMART | Retail |
Bajaj Holdings | BAJAJHLDNG | Financial Services |
Bandhan Bank | BANDHANBNK | Banking |
Bank of Baroda | BANKBARODA | Banking |
Berger Paints | BERGEPAINT | Consumer Goods |
Biocon | BIOCON | Pharmaceuticals |
Bosch | BOSCHLTD | Automobile |
Cadila Healthcare | CADILAHC | Pharmaceuticals |
Cholamandalam | CHOLAFIN | Financial Services |
Colgate-Palmolive | COLPAL | Consumer Goods |
Dabur | DABUR | Consumer Goods |
DLF | DLF | Construction |
GAIL | GAIL | Energy - Oil & Gas |
Gland Pharma | GLAND | Pharmaceuticals |
Godrej Consumer Products | GODREJCP | Consumer Goods |
Havells | HAVELLS | Consumer Durables |
HDFC AMC | HDFCAMC | Financial Services |
Hindustan Petroleum | HINDPETRO | Energy - Oil & Gas |
ICICI Lombard General Insurance | ICICIGI | Financial Services |
ICICI Prudential Life Insurance | ICICIPRULI | Financial Services |
Indraprastha Gas | IGL | Energy - Oil & Gas |
Indus Towers | INDUSTOWER | Telecommunication |
Info Edge | NAUKRI | Internet |
Interglobe Aviation | INDIGO | Services - Transport & Logistics |
Jindal Steel and Power | JINDALSTEL | Metals |
Jubilant FoodWorks | JUBLFOOD | Consumer Goods |
L&T Infotech | LTI | Information Technology |
Lupin | LUPIN | Pharmaceuticals |
Marico | MARICO | Consumer Goods |
Muthoot Finance | MUTHOOTFIN | Financial Services |
NMDC | NMDC | Metals |
PI Industries | PIIND | Chemicals |
Pidilite Industries | PIDILITIND | Chemicals |
Piramal Enterprises | PEL | Pharmaceuticals |
Procter & Gamble | PGHH | Consumer Goods |
Punjab National Bank | PNB | Banking |
SBI Card | SBICARD | Financial Services |
Siemens | SIEMENS | Infrastructure |
Steel Authority of India | SAIL | Metals |
Torrent Pharmaceuticals | TORNTPHARM | Pharmaceuticals |
United Spirits | MCDOWELL-N | Consumer Goods |
Vedanta | VEDL | Metals |
Yes Bank | YESBANK | Banking |
Nifty Sectoral Indices
NSE Indices Limited (formerly known as India Index Services & Products Limited (IISL)), a subsidiary of the National Stock Exchange of India (NSE), provides a variety of indices and index-related products and services to Indian capital markets. NSE Indices Ltd. operates as a subsidiary of NSE Strategic Investment Corporation Limited.
NSE Indices Ltd. was formed with the objective of providing a variety of indices and index-related products and services to capital markets. The company maintains over 100 equity indices comprising broad-based benchmark indices, sectoral indices, fixed income, and customized indices.
Additional to the nifty 50 indexes, there are other indices that target specific sectors. These sectors are automobile, bank, consumer durables, Media market, IT, etc. Let’s see the list of sectoral indices listed with Nifty 50.
Index | Constituents |
|---|---|
NIFTY Auto | Amara Raja Batteries, Ashok Leyland, Bajaj Auto, Balkrishna Industries, Bharat Forge, Bosch, Eicher Motors, Exide, Hero Motocorp, Mahindra & Mahindra, Maruti Suzuki, MRF, Tata Motors, Tube Investments, TVS Motors |
NIFTY Bank | Axis Bank, AU Small Finance Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, IndusInd Bank, Kotak Mahindra Bank, Punjab National Bank, RBL Bank, State Bank of India |
NIFTY Consumer Durables | Amber Enterprises, Bata, Blue Star, Crompton Greaves, Dixon Technologies, Havells, Kajaria Ceramics, Orient Electric, Rajesh Exports, Relaxo, Titan Company, TTK Prestige, V-Guard, Voltas, Whirlpool |
NIFTY Financial Services | Axis Bank, Bajaj Finance, Bajaj Finserv, Cholamandalam, HDFC, HDFC AMC, HDFC Bank, HDFC Life, ICICI Bank, ICICI Lombard, ICICI Prudential, Kotak Mahindra Bank, M&M Finance, Muthoot Finance, Piramal Enterprises, Power Finance Corporation, REC, SBI Life Insurance Company, Shriram Transport Finance, State Bank of India |
NIFTY FMCG | Britannia, Colgate-Palmolive, Dabur, Emami, Godrej Consumer Products, Hindustan Unilever, ITC Limited, Marico, Nestlé India, Procter & Gamble, Radico Khaitan, Tata Consumer Products, United Breweries, United Spirits, Varun Beverages |
NIFTY Healthcare | Alembic Pharmaceuticals, Alkem Laboratories, Apollo Hospitals, Aurobindo Pharma, Biocon, Cadila Healthcare, Cipla, Divi's Laboratories, Dr Lal PathLabs, Dr. Reddy's Laboratories, Glenmark Pharmaceuticals, Granules India, Ipca Laboratories, Laurus Labs, Lupin, Metropolis Healthcare, Pfizer India, Strides Pharma, Sun Pharmaceutical, Torrent Pharmaceuticals |
NIFTY IT | Coforge, HCL Technologies, Infosys, L&T Infotech, L&T Technology Services, Mindtree, Mphasis, Tata Consultancy Services, Tech Mahindra, Wipro |
NIFTY Media | Dish TV, Hathway, INOX Leisure, Nazara Technologies, Network18, PVR Cinemas, Saregama, Sun TV Network, TV18, Zee Entertainment Enterprises |
NIFTY Metal | Adani Enterprises, APL Apollo Tubes, Coal India, Hindalco, Hindustan Copper, Hindustan Zinc, Jindal Steel, JSW Steel, National Aluminium Company, NMDC, Ratnamani Metals & Tubes, Steel Authority of India, Tata Steel, Vedanta, Welspun Corp |
NIFTY Oil & Gas | Adani Total Gas, Aegis Logistics, BPCL, Castrol, GAIL, Gujarat Gas, Gujarat State Petronet, HPCL, Indraprastha Gas, IOC, Mahanagar Gas, MRPL, Oil India, ONGC, Petronet LNG, Reliance Industries |
NIFTY Pharma | Abbott India, Alembic Pharmaceuticals, Alkem Laboratories, Aurobindo Pharma, Biocon, Cadila Healthcare, Cipla, Divi's Laboratories, Dr. Reddy's Laboratories, Gland Pharma, Glenmark Pharmaceuticals, Granules India, Ipca Laboratories, Laurus Labs, Lupin, Natco Pharma, Pfizer India, Strides Pharma, Sun Pharmaceutical, Torrent Pharmaceuticals |
NIFTY Private Bank | Axis Bank, Bandhan Bank, City Union Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, IndusInd Bank, Kotak Mahindra Bank, RBL Bank |
NIFTY PSU Bank | Bank of Baroda, Bank of Maharashtra, Bank of India, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, J&K Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of India, UCO Bank, Union Bank of India |
NIFTY Realty | Brigade Enterprises, Brookfield India REIT, DLF, Embassy Office Parks REIT, Godrej Properties, Indiabulls Real Estate, Macrotech Developers, Mindspace Business Parks REIT, Oberoi Realty, Phoenix Mills, Prestige Estates |
BSE- Sensex 30 index
BSE Sensitive Index is a portmanteau of the words Sensitive and Index. BSE Sensex was launched on 1 January 1986; the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX was taken as 100 on 1 April 1979 and its base year as 1978–79.
The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply SENSEX) is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange. The 30 constituent companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy.
The index has increased by over twenty-five times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the S&P BSE SENSEX works out to be 18.6% per annum.
This is the list of stocks in BSE SENSEX 30 as of April 2021.
Company name | Symbol | Sector |
|---|---|---|
Asian Paints | ASIANPAINT.BO | Paints |
Axis Bank | AXISBANK.BO | Banking - Private |
Bajaj Auto | BAJAJ-AUTO.BO | Automobile |
Bajaj Finance | BAJFINANCE.BO | Finance (NBFC) |
Bajaj Finserv | BAJAJFINSV.BO | Finance (Investment) |
Bharti Airtel | BHARTIARTL.BO | Telecommunications |
Dr Reddy's Laboratories | DRREDDY.BO | Pharmaceuticals |
HCL Technologies | HCLTECH.BO | IT Services & Consulting |
HDFC | HDFC.BO | Finance (Housing) |
HDFC Bank | HDFCBANK.BO | Banking - Private |
Hindustan Unilever Limited | HINDUNILVR.BO | FMCG |
ICICI Bank | ICICIBANK.BO | Banking - Private |
IndusInd Bank | INDUSINDBK.BO | Banking - Private |
Infosys | INFY.BO | IT Services & Consulting |
ITC Limited | ITC.BO | Cigarettes & FMCG |
Kotak Mahindra Bank | KOTAKBANK.BO | Banking - Private |
Larsen & Toubro | LT.BO | Engineering & Construction |
Mahindra & Mahindra | M&M.BO | Automobile |
Maruti Suzuki | MARUTI.BO | Automobile |
Nestlé India | NESTLEIND.BO | FMCG |
NTPC | NTPC.BO | Power generation/Distribution |
Oil and Natural Gas Corporation | ONGC.BO | Oil exploration and Production |
Power Grid Corporation of India | POWERGRID.BO | Power generation/Distribution |
Reliance Industries Limited | RELIANCE.BO | Conglomerate |
State Bank of India | SBIN.BO | Banking - Public |
Sun Pharma | SUNPHARMA.BO | Pharmaceuticals |
Tata Consultancy Services | TCS.BO | IT Services & Consulting |
Tech Mahindra | TECHM.BO | IT Services & Consulting |
Titan Company | TITAN.BO | Diamond & Jewellery |
UltraTech Cement | ULTRACEMCO.BO | Cement |
Fact
On 5th April 2021, the index fell by 708 points. This was due to the COVID-19 pandemic after WHO declared it a pandemic.
On 13th April 2021, the index again fell by 1708 points. This was due to the panic-driven in the country due to the COVID-19 pandemic.
On 1st February 2021, the index bounced back and gained 2314 points. This was due to the positive news that infection numbers were declining in some of the worst affected areas around the world.
Other Indexes by BSE
Index |
|---|
S&P BSE SENSEX |
S&P BSE SENSEX 50 |
S&P BSE SENSEX Next 50 |
S&P BSE 100 |
S&P BSE Bharat 22 Index |
S&P BSE MidCap |
S&P BSE SmallCap |
S&P BSE 200 |
S&P BSE 150 MidCap Index |
S&P BSE 250 SmallCap Index |
S&P BSE 250 LargeMidCap Index |
S&P BSE 400 MidSmallCap Index |
S&P BSE 500 |
S&P BSE AllCap |
S&P BSE LargeCap |
S&P BSE SmallCap Select Index |
S&P BSE MidCap Select Index |
S&P BSE 100 LargeCap TMC Index |
Market Cap/Broad- End of Day Index
Index |
|---|
S&P BSE SENSEX Next 50 TMC |
S&P BSE LargeMidCap |
S&P BSE MidSmallCap |
S&P BSE 250 LargeMidCap 65:35 Index |
S&P BSE SENSEX 50 TMC |
International Indexes to compare
Likewise Nifty 50 and Sensex 30, other countries also have their own index. By seeing these indices, we can know how these countries stock market is performing. Traders do not look into all the country's indices; they specifically look into countries that are the major contributors to the world GDP. Let’s look at some of these indices:
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.
NASDAQ
The Nasdaq Composite is a stock market index that includes almost all stocks listed on the Nasdaq stock exchange. The composition of the NASDAQ Composite is heavily weighted towards companies in the information technology sector. The Nasdaq-100, which includes 100 of the largest non-financial companies in the Nasdaq Composite, accounts for over 90% of the movement of the Nasdaq Composite.
DJIA
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow, is a price-weighted measurement stock market index of 30 prominent companies listed on stock exchanges in the United States. The DJIA includes only 30 large companies and is a price-weighted index, unlike later stock indices that use market capitalization.
FTSE
The Financial Times Stock Exchange 100 Index, also called the FTSE 100 Index, FTSE 100 is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The index is maintained by the FTSE Group, a subsidiary of the London Stock Exchange Group.
SGX Nifty 50
SGX Nifty indicates a flat opening for the Indian stock markets today. Singapore Nifty (SGX Nifty) is the Indian Nifty that is traded in the Singapore Stock Exchange and is considered to be the first indication of the opening of the Indian market.
Nikki 225
The Nikkei 225, or the Nikkei Stock Average, more commonly called the Nikkei or the Nikkei index, is a stock market index for the Tokyo Stock Exchange. It has been calculated daily by the Nihon Keizai Shimbun newspaper since 1950.
DAX
The DAX is a stock market index consisting of the 40 major German blue-chip companies trading on the German Frankfurt Stock Exchange.
Conclusion
Seeing these indexes and comparing these with other country indexes gives us a good view of the overall stock market performance all around the world. In India, we see Nifty 50 and Sensex 30 to understand the general view of the country’s market performance. Also, these indices have a future and options trading system, where day traders trade. Nifty 50 options are the most widely day traded option system in India.
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