In depth of Index

An Index is a statistical measure of change in an economy or a securities market. In the case of financial markets, an index is an unreal portfolio of securities representing a particular market or a portion of it. Each has its own calculation methodology and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

Indices are classified into various category. The basic 5 classifications as published by IISL for NSE are:

• Broad Market Indices
• Sectoral Indices
• Thematic Indices
• Strategy Indices
• Fixed Income Indices

Broad market indices: They are designed to reflect the movement of the entire market. The market mantled can be large cap, mid cap and small cap.

The example of broad market indices are CNX Nifty, CNX Nifty Junior, LIX 15,CNX 100,CNX 200,CNX 500,Nifty Midcap 50,CNX Midcap, CNX Small cap etc.

Sectoral indices: The Sectoral Indices are designed to reflect the behaviour and performance of a finical sector of the financial market. The various sectors can be classified on the basis of type of business like Primary, secondary and tertiary or on the basis of area dealt in like automobiles, pharmaceuticals, information technology etc.

The examples of sectoral indices are CNX Energy, CNX Finance, CNX FMCG etc.

Thematic indices: Thematic indices are those stocks having a general theme or trend that an investor feels might provide positive investment returns. They can be based on consumption, MNC, PSE etc.

The examples of thematic index are CNX Commodities, CNX Consumption, CNX Infrastructure etc.

Strategy indices: Strategy indices are indices that track the performance of an algorithmic trading strategy . Algorithm can be based on volatility, investable weight factor, alpha, leverage, dividend etc.

The examples of strategy index are CNX 100 Equal Weight, CNX High Beta Index, CNX Low Volatility Index etc

Fixed Income Indices: A fixed income index or bond market index is a method of measuring the value of a section of the bond market. It is computed from the prices of selected bonds. It is a tool used by investors and financial managers to describe the market, and to compare the return on specific investments.

The examples of Fixed Income Index are GSEC10 NSE Index, GSECBM NSE Index, NSE GSECBM Clean Price index etc

Indices are of extreme help in selecting the best of the stock amongst the lot and comparing its return to the benchmark as set by the index.

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