The stock market index is an important concept in the stock market as it is a measure of the stock market. It tells about the market’s overall trends and the market sentiments. But the question here is, how index is calculated in stock market?
Let us quickly have a look.
There are two major stock market indices in India: SENSEX and NIFTY. While SENSEX is the collection of the top 30 companies based on their market capitalization, NIFTY is a collection of 50 companies.
The calculation of both indices is down as follows.
- SENSEX Index Value =(total free float market capitalization/ Base market capitalization) x Base index value
Free Float market capitalization– The number of shares of the company that is available for trading in the secondary market multiplied by the market capitalization is known as free-float market capitalization.
Base Index Value–It is 100 points.
- NIFTY Index Value = (Current Market Value/Base Market Capital) * 1000
In this way, the index is calculated in the stock market. Looking at the overall momentum of the indices, you can surely take a call on your trading decisions.
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