NSE launches Digital Index

What are Stock Market Index/Indices

• It is a statistical tool which reflects changes in the financial market .Stock market indices are indicators that reflect the performance of the market as a whole or of a certain segment of the market.
• A stock market index is created by selecting certain stocks of similar companies or certain stocks that meet a set of predetermined criteria. These shares are all already listed and traded on the exchange. Share market indices can be created based on a variety of selection criteria, such as an industry, a segment, or market capitalization, among others.
• Each share market index measures the price movement and the performance of the shares that constitute that index. This essentially means that the performance of any stock market index is directly proportional to the performance of the underlying stocks that make up the index. In simpler terms, if the prices of the stocks in an index go up, that index, as a whole, also goes up. And if they plummet, so does the index.

Types of Index 

 There are different types of Indices based on the kind of stocks which are selected to create indices.

Some of the important ones are as follows :

1.  Benchmark Indices :  They statistically represent the overall market performance 

In India there are two benchmark Indices 

1. BSE Sensex : It consist of 30 companies listed on the Bombay Stock Exchange 
2. Nifty : It consists of 50 companies listed on the National Stock Exchange .

2. Indices created based on market capitalization of companies, such as BSE Midcap and BSE Smallcap.

3. Sector-specific indices like Nifty FMCG, Nifty Bank Index.