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Basics of Stock Market 13: What are stock market indexes, why are they important?



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.


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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


Nifty 50 index

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.

Performance of BSE  from October 1999 to February 2020
Performance of BSE from October 1999 to February 2020

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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