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All About Stock Market Indices | Best Beginner’s Guide to the Stock Market | Module 2

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All About Stock Market Indices | Best Beginner’s Guide to the Stock Market | Module 2

You might have heard about the stock market indices like Sensex, Nifty 50 and Bank nifty, etc on the business channels. In today’s article, we are going to discuss them in detail. 

Before going deep into this topic, it is important to know- 

What are Stock Market Indices? 

A stock market index is a collection of different stocks which fall within a certain category or having certain similar characteristics. There are different types of stock market indices such as sectoral indices which represent the stocks of particular sectors, Volatility indices which represent the relative volatility in the market, etc. Stock market indices are used to analyze the overall performance of the market.

For example, there are thousands of companies that are listed on the exchanges. For an individual investor, it is not possible to track the performance of the all-listed companies and invest in a certain stock, and to overcome this problem indices are used to track the performance of the market. 

How do stock market indices work? 

An Index contains a group of stocks. But the individual performance of the stock is weighted to calculate the overall performance of that index. Stocks with higher weightage have more influence on the movement of that index and the stocks which are having lower weightage have less influence on the movement of the index. 

Generally, stock market indices are weighted according to 3 categories- 

  • Market-capitalization. 
  • Price weightage 
  • Equal Weightage. 

Market capitalization is the value you get by multiplying the total number of shares by the present share price. Market-capitalization-weighted indices, like the Nifty50 index, give more weight to larger companies with higher market capitalizations. That is why reliance is having more weightage than any other companies which are part of Nifty 50. 

In a price-weighted index, each company in that index makes up a fraction of the total index proportional to that company’s share stock price per share. In simple words, stocks with higher prices contribute more towards the index. 

In an equal-weighted index, each stock has equal weightage irrespective of share price and market capitalization. 

Nifty 50 Index 

The NIFTY 50 is a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. This index includes 13 sectors of the Indian economy such as information technology, financial services, consumer goods, entertainment and media, financial services, metals, pharmaceuticals, telecommunications, cement and its products, automobiles, pesticides and fertilizers, energy, and other services. 

This index was established on 22 April 1996 with a base price of 1000. Nifty 50 is owned and managed by NSE Indices (previously known as India Index Services & Products Limited), which is a wholly-owned subsidiary of the NSE Strategic Investment Corporation Limited. 

Here is the list of stocks that are part of nifty 50 –

 Name of the companySectorWeight
1Reliance Industries Ltd.Energy - Oil & Gas10.77%
2HDFC Bank Ltd.Banking10.66%
3Infosys Ltd.Information Technology7.42%
4Housing Development Finance Corporation Ltd.Financial Services7.29%
5ICICI Bank Ltd.Banking6.59%
6Tata Consultancy Services Ltd.Information Technology4.86%
7Kotak Mahindra Bank Ltd.Banking4.16%
8Hindustan Unilever Ltd.Consumer Goods3.04%
9Axis Bank Ltd.Banking2.87%
10ITC Ltd.Consumer Goods2.84%
11Larsen & Toubro Ltd.Construction2.78%
12State Bank of IndiaBanking2.39%
13Bajaj Finance Ltd.Financial Services2.23%
14Bharti Airtel Ltd.Telecommunication2.13%
15Asian Paints Ltd.Consumer Goods1.64%
16HCL Technologies Ltd.Information Technology1.58%
17Maruti Suzuki India Ltd.Automobile1.46%
18Mahindra & Mahindra Ltd.Automobile1.23%
19UltraTech Cement Ltd.Cement1.13%
20Sun Pharmaceutical Industries Ltd.Pharmaceuticals1.03%
21Wipro Ltd.Information Technology0.97%
22IndusInd Bank Ltd.Banking0.96%
23Titan Company Ltd.Consumer Goods0.94%
24Bajaj Finserv Ltd.Financial Services0.93%
25Nestle India Ltd.Consumer Goods0.92%
26Tata Motors Ltd.Automobile0.92%
27Tech Mahindra Ltd.Information Technology0.91%
28HDFC Life Insurance Co. Ltd.Insurance0.88%
29Power Grid Corporation of India Ltd.Energy - Power0.88%
30Dr. Reddy’s Laboratories Ltd.Pharmaceuticals0.86%
31Tata Steel Ltd.Metals0.86%
32NTPC Ltd.Energy - Power0.83%
33Bajaj Auto Ltd.Automobile0.79%
34Adani Port and Special Economic ZoneInfrastructure0.79%
35Hindalco Industries Ltd.Metals0.79%
36Grasim Industries Ltd.Cement0.74%
37Divi’s Laboratories Ltd.Pharmaceuticals0.68%
38Hero MotoCorp Ltd.Automobile0.67%
39Oil & Natural Gas Corporation Ltd.Energy - Oil & Gas0.65%
40Cipla Ltd.Pharmaceuticals0.64%
41Britannia Industries Ltd.Consumer Goods0.63%
42JSW Steel Ltd.Metals0.61%
43Bharat Petroleum Corp. Ltd.Energy - Oil & Gas0.58%
44Eicher Motors Ltd.Automobile0.56%
45Shree Cement Ltd.Cement0.56%
46SBI Life Insurance Co.Insurance0.54%
47Coal India Ltd.Energy & Mining0.51%
48UPL Ltd.Chemicals0.49%
49GAIL (India) Ltd.Energy - Oil & Gas0.42%
50Indian Oil Corporation Ltd.Energy - Oil & Gas0.40%

Sensex index 

The Sensex is a benchmark Indian stock market index that represents 30 well-established and financially sound companies listed on the Bombay Stock Exchange. Sensex was established on 1st Jan 1986 with the base period 1978-79 and base value of 100. Sensex is the combination of two words Sensitive and Index. 

By using the information from 1979 onwards, the long-term rate of return of Sensex comes out to be 18.6% per annum. 

Below is the list of 30 companies that are the part of Sensex index- 

 Name of the companySectorWeight
1Reliance Industries Ltd.Integrated Oil & Gas0.1199
2HDFC Bank Ltd.Banks0.1184
3Infosys Ltd.IT Consulting & Software0.0906
4Housing Development Finance Corporation Ltd.Housing Finance0.083
5ICICI Bank Ltd.Banks0.0737
6Tata Consultancy Services Ltd.IT Consulting & Software0.0576
7Kotak Mahindra Bank Ltd.Banks0.0488
8Hindustan Unilever Ltd.FMCG0.0375
9ITC Ltd.FMCG0.0349
10AXIS Bank Ltd.Banks0.0335
11Larsen & Toubro Ltd.Construction & Engineering0.0313
12Bajaj Finance Ltd.Finance (including NBFCs)0.0263
13State Bank of IndiaBanks0.0259
14Bharti Airtel Ltd.Telecom Services0.0231
15Asian Paints Ltd.Furniture,Furnishing,Paints0.0197
16HCL Technologies Ltd.IT Consulting & Software0.0189
17Maruti Suzuki India Ltd.Cars & Utility Vehicles0.0172
18Mahindra & Mahindra Ltd.Cars & Utility Vehicles0.0148
19UltraTech Cement Ltd.Cement & Cement Products0.014
20Sun Pharmaceutical Industries Ltd.Pharmaceuticals0.0116
21Tech Mahindra Ltd.IT Consulting & Software0.0111
22Titan Company Ltd.Other Apparels & Accessories0.0111
23Nestle India Ltd.Nestle India Ltd.0.0107
24Bajaj FinservFinance (including NBFCs)0.0104
25IndusInd Bank Ltd.Banks0.0103
26POWERGRIDElectric Utilities0.0103
27Tata Steel Ltd.Iron & Steel/Interm.Products0.0101
28NTPC Ltd.Electric Utilities0.0094
28Bajaj Auto Ltd.2/3 Wheelers0.0086
30Oil & Natural Gas Corporation Ltd.Exploration & Production0.0073

Along with Nifty 50 and Sensex, Bank nifty, CNX IT, CNX Metal, CNX Auto are the major sectorial stock market indices of the Indian stock market. 

 I hope that, in today’s module of beginner’s guide to the stock market, I was able to explain to you about stock market indices and how stock market indices work. Please let us know your thoughts and queries in the comment section. 

Know more about the basics of the stock market, from our previous blog of the series, “Best Beginner’s Guide to the Stock Market | Module 1 | What is Stock Market and How it works?” or check our video “Basics of Stock Market” on Youtube to know more about it.

2 Comments

    1. Thank you, Mayank, glad that you find the blog helpful. We constantly try to bring helpful blogs for our traders and will continue doing so.

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