The stock market index functions as a indicator of the general economic scenario of a country. If stock market indices are growing, It indicates that the overall general economy of country is stable if however the index go down it shows some trouble in economy.
Types of Indices For the entire world ( global indices) For an entire continent ( regional indices – for example S&P Latin america 40) For an entire country ( national indices – for example Sensex & Nifty for India ) For a particular sector in a country – ( sectoral indices – for example BSE BANKEX which tracks top banking companies in India) For any other theme / group of economy / companies you want to track. ( example Dow Jones Islamic world market index)
Construction of Stock Index A stock index is created by choosing high performing stocks. Index can be calculated by two ways by considering the price of component stock alone. By considering the market value or size of the company called market capitalization method. Two main stock index of India are Sensex and Nifty. Both index gives general idea about whether most of the stocks have gone up or most of the stocks gone down. The SENSEX is an indicator of all major companies of the BSE and the Nifty is an indicator of all major companies of the NSE. Both Index represent the top stocks at National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The word Nifty can be taken from word national and fifty while Sensex abbreviated as Sensitive index. sensex and nifty, bse nse, stock market, Share Market India