Stock Market Index

 A stock market index is the measurement of value of a section or it’s a tool used by investors to keep track of changes in market value. It is one of the best means to check economic situation. It is mainly used in analysis and investment decision making.

                                             

Stock index can be classified as

1. Value Weighted Index - In this type of index each stock affects the index value as compared to market value.

2. Price Weighted index - A price weighted stock is the average of prices all the stock included in the index. Consider an example a price weighted index containing 3 stocks - Stock A priced 10 dollar, Stock B priced 40 dollar, Stock C priced 100 dollar. The average of this stock price is 10+40+100 can be divided by no of stocks in the index which is 50.         

Popular stock market indexes in India

Index	Sample size	Base year	Base value	Weighting Typs
BSE Sensex	30	1978-79	100	Value Weighted
CNX Nifty	50	1995	100	Do
RBI Index	338	1981-82	100	Un-Weighted
BSE National	100	1983-84	100	Value
Economic Times	72	1984-85	100	Equal Weighted
Financial Exp	100	1979-80	100	Value

Factor affecting in construction of Stock market Index

1.Sample Size

  -Statistically significant large enough sample should be taken

2. Representativeness

  -It represents total no of population and its essential characteristics of interest

3. Base year

  -It should be a normal year

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