Indian Stock Market Indices

Stock markets are very essential to a financial system. These are places where shares of the listed companies are being traded. The performance of a stock market
is measured with the help of market indices or stock indices. A good stock index sums up the overall performance of the market on a daily basis in a single figure. It captures the movement of the well diversified and highly liquid stocks. In a broader sense, market indices resemble the performance of the economy also. Therefore, the main market indices can be said to be the pulse rate of the economy.

Index movements reflect the changing expectations of investors regarding the companies' policies and performance. For example, when a company declares dividend, the share price may go up and the index in which it is included may reflect the change. An index is also responsive to economic scenario of the country and global economic cues. The index is calculated by finding the weighted average of the prices of the most actively traded companies in the market, where the weights are generally in proportion to the market capitalization of the company. Indices can be classified into broad-market index and specialized index. A broad-market index consists of all the large liquid stocks of the country and becomes the benchmark for the entire capital market economy. An example for this is the BSE Sensex. A specialized index resembles the performance of a specific sector or industry in an economy. Examples for such induces include BANKEX, BSE-MIDCAP.

In India, Bombay Stock Exchange and National Stock Exchange are the main stock markets. They have got their own broad-market and specialized indices. A brief description of these markets and their key indices is given below.

Major BSE indices include BSE Sensex, BSE 100 Index, BSE 200 Index, BSE 500 Index, BSE MIDCAP Index, BSE SMALLCAP Index, BSE TECH Index, BSE PSU Index, BSE IPO index, BSE AUTO Index, BSE BANKEX, BSE CG Index, BSE CD Index, BSE FMCG Index, BSE HC Index, BSE IT Index, BSE Metal Index and BSE Oil & Gas Index.

Sensex or BSE 30 was introduced in 1986, constituting stocks of large and established companies from different sectors. The base year for the index was 1978 -79. Total number of listed companies taken for the calculation is 30. They figure in top 100 in terms of market capitalization and are also among the leaders in their industry groups. Reliance Industries, ACC, Infosys, ICICI Bank, Larsen & Toubro are examples of companies currently included in Sensex.

BSE 100 index is also called as BSE National Index as it works as broad-based index reflecting the stock market at national level. Due to the limited effect of Sensex, in 1989, BSE started BSE 100 index, compiled of 100 companies from "Specified" and the "Non-Specified" list of the five major stock exchanges, viz. Mumbai, Calcutta, Delhi, Ahmedabad and Madras.

Launched in 1994, BSE 200 index comprises of the 200 selected companies and their equity shares from the specified and non-specified lists of the major exchanges. Companies are short listed on the basis of their current market capitalization and certain fundamental factors like the market performance of the company, volumes of the company turnover etc.

Due to the changing pattern of the economy, Bombay Stock Exchange formed a new index BSE 500 comprising of 500 scrips. The index represents about 93% of the total market capitalizations and is said to represent the market as a whole. BSE 500 was launched on August 16, 2005 with 1999 as base year.

Launched in June 2001, BSE PSU Index is composed of all Public Sector Undertakings stocks in BSE 500 Index. The objective behind the launch of this Index was to track the performance of listed equity of PSU companies. Base value has been set at 1000 and the base date is February 1, 1999.

BSE Midcap index was introduced by the BSE to make sure the unbiased movement of the market. Midcap index track the performance of the companies with relatively small market capitalization. Base year chosen was 2002-2003 and the base index value was 1000 for each index.

BSE Smallcap Index was introduced to track the performance companies that have market capitalizations less than the midcap companies. The base year is 2002-2003 and the base index value is 1000.

Bankex was launched by the BSE to track the performance of the leading banking sectors as bank stocks are emerging as a major segment of the stock market. The base date for BANKEX is January 1, 2002 and base value is 1000 points. Bankex includes 12 selected bank stocks which represent totally about 90% market capitalization of all the banking sector stocks listed on the BSE.

Launched on August 24, 2009, BSE IPO index is to track the primary market environment in the Indian capital market and to measure the growth in investor wealth within a period of two years after listing of a company subsequent to the successful completion of initial public offering. Base date is May 3, 2004 and base index value is 1000.

Major NSE indices include S&P CNX Nifty, CNX Nifty Junior, CNX 100, S&P CNX 500, CNX Midcap, Nifty Midcap 50 and S&P CNX Defty.

The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply Nifty is the leading index for large companies on the National Stock Exchange of India. The Nifty is a well diversified 50-stock index accounting for 21 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL has a marketing and licensing agreement with Standard & Poor's, which is a world leader in index services.

The next rung of liquid securities after S&P CNX Nifty is the CNX Nifty Junior. It may be useful to think of the S&P CNX Nifty and the CNX Nifty Junior as making up the 100 most liquid stocks in India. Stocks in the CNX Nifty Junior are the most liquid of the stocks excluded from the S&P CNX Nifty.

CNX 100 is a diversified 100 stock index accounting for 35 sectors of the economy. CNX 100 is also owned and managed by the IISL.

The S&P CNX 500 is India's first broad-based benchmark of capital market. The S&P CNX 500 represents about 93% of the total market capitalization and about 91% of the total turnover on the NSE as on September 30, 2009.

The primary objective of the CNX Midcap Index is to capture the movement and be a benchmark of the midcap segment of the market. The CNX Midcap Index has a base date of January 1, 2003 and a base value of 1000.

Nifty Midcap 50 Index is used to capture the movement of the midcap segment of the market. It can also be used for index-based derivatives trading. The Index has a base date of January 1, 2004 and a base value of 1000.

In order to help the institutional investors and offshore fund enterprises with equity exposure to India, a new index called the S&P CNX Defty – the Dollar Denominated version of S&P CNX Nifty - has been developed.

In short, as one of the fastest growing economies in the world, India's capital market is also growing in scale and depth. This growth will definitely pave way for the introduction of more stock market indices to address the emerging needs.

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