What is a Stock Index?

23 May1

In stock market an index is mainly an indicator which provides you top most stock companies and it provide you a general suggestion about whether the top most stocks are going down or going up. In India there are two main stock indexes which are SENSEX and NIFTY index. Both have different companies’ numbers, in the case of Sensex, it contains 30 top most stock companies and on the other hand nifty contain 50 top most stock companies. The Sensex is a pointer of all the most important companies of the BSE (Bombay Stock Exchange) and Nifty is a pointer of all the chief companies of the NSE (National Stock Exchange). With the help of these indexes we can make own trading concept and tips like as Nifty Tips for the companies which are registered in Nifty. These indexes included companies of different types of segments such as pharmacy segment, its segment, agricultural segment, and crude oil segments.

Whenever the Sensex goes in positively that mean the stock prices of the top most companies on the BSE have been gone increase and on the other situation when the Sensex goes negative, this denotes that the stock price of most of the companies on the BSE has been gone decreasingly. Every trader should tally all the indexes before any investment in stocks.

Nifty is a similar index to the Sensex, which stand for the top stocks of the NSE. The BSE is located at Bombay and the NSE is located at Delhi. Both are big stock exchange in India, and every trader must follow the rules of these exchanges. These are also part of the most important stock exchanges in the world. There are many other stock exchanges in India such as the CSE (Calcutta Stock Exchange) etc. But they are not as well-liked as the BSE and the NSE. All the traders want to trade in BSE and NSE. These indexes give you general information about whether the mid-cap stocks go positive and negative. This is also known as the Mid-cap Index for BSE. There are numerous kinds of indexes in the market. There is also an index of the companies of metal stocks and another for the FMCG stock companies and automobile stocks etc. First for all every traders need to choose the segments in which they want to trade and also know about related stock exchange, how index top most companies? , how calculate the Sensex index? Below we discuss in more details.

Calculations for BSE SENSEX index?

This blog gives details how the Sensex value or Sensitive index is calculated. To perform calculations for the Sensex index for different BSE index companies we need use capitalization technique of the free-float market. This is the most important method which is the most worldwide accepted process for calculating a stock index. In this calculation we take top 30 companies which changed according to the market state. The Sensex is calculated with the help of the free-float market capitalization technique. Specialist traders easily analyze Sensex value and take perfect decision with the condition of market. Stock trading is a very risky task, many traders take help of many advisory firms and they provide tips for all trading segments like as Stock Tips, Option Tips and Forex Tips. But traders should take a decision on their knowledge.

Free Float Market Capitalization

 When you talk about mid-cap stock, small-cap stock and large-cap stocks, then you talk about market capitalization!

Market cap or market capitalization is minimally the significance of a company in the form of its stock. If you want to buy all the shares of a specific company, then the necessary amount for buying the entire share is called the “market capitalization” of that company.

To determine the market cap of any company, we need a calculation in which multiply by the current share price by the total number of shares which issued by the company.

According to the value of the market cap, companies are divided into three group first is mid cap company, the second is large cap and the last one is a small cap company.

There are many websites which provide market cap value of particular companies and money control is one of the websites which provide market cap values.

The open market shares are the share which can be traded by every trader, these shares also known as free-float shares. When traders analyze on the Sensex, they are very much interested in these kinds of shares. Most of companies have two kinds of shares, one for all the traders that means free float shares and seconds is not available for normal traders.

When a company report has created, then all kinds of shares already define and this report shows how many shares allotted to the company by BSE and BSE also decide free float shares and special chars. If you know the free float factors then you can find a free float market factor by simple multiplication of free float factors by market cap of the company. The Free float market cap of the company is the value of the companies‘share of open market.

Most of trader wants to know how to calculate the Sensex value, and then I would like to show you Sensex calculation is a simple measurement where first of all we find out the value of the “free-float market cap” for each the top 30 companies that include for making the value of the Sensex.

After that, some of all the free-float market caps values of all the companies and then make all this compared to the Sensex base. The cost you obtain is the Sensex value. Every time one of these companies has a stock split or a bonus etc. Through this a suitable change is made in the “market cap” computation.

The Top 30 companies that create the Sensex index are preferred and analysis from by an index board according to the time. The members of the index board are mutual fund managers, academicians, autonomous governing, finance journalists, board members and other contestant in the financial markets.

 The main rules or regulation for choosing the 30 stocks are as follows:

Market capitalization: The Company must have a market capitalization for the Top 100 market capitalization’s of the BSE. The market capitalization for every company must be greater to the 0.5% of the total capitalization of the Index.

Number of trades: The script must be among the top companies indexed by average trade number per day intended for the previous one year.

Industry representatives: The companies must be organizers in their business group.

Listed history: The companies must have a listing history for one year on BSE.

Track record: In the estimation of the index board, the company must have suitable track evidence.


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