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E-Quest #16

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A market index is a hypothetical portfolio of investment holdings that represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings. Some indexes have values based on market-cap weighting,revenue-weighting, float-weighting, and fundamental-weighting. Weighting is a method of adjusting the individual impact of items in an index. Investors follow different market indexes to gauge market movements. The two of the popular stock indexes for measuring the performance of the Indian market are the BSE SENSEX and the NIFTY 50. The SENSEX is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange. While 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. The market index basically acts as a yardstick against which you can view the performance of your personal portfolio. Constant underperformance should coerce you to check your current habits in the market, and should act as an indication to improve your current skills.