Module 1 ยท Stock Market Basics
An index is a basket of stocks that tells you how a slice of the market is doing.
An index groups many stocks into one number so you can see how a whole segment of the market moves at a glance. The Nifty 50 tracks the 50 largest NSE companies; the Sensex tracks 30 large BSE companies.
There are also indices for mid-caps, small-caps, sectors and themes. A rising index usually means most stocks in that basket are rising.
Indices matter because they are a benchmark: you can compare a stock's or a fund's performance against them, and they reflect overall market mood.
Example: Nifty 50
If the Nifty 50 rises 1%, it means the weighted average of its 50 companies moved up about 1%. You can check whether a large-cap stock you own is beating or lagging the index.
What does the Nifty 50 represent?
Why might a fund manager compare their performance to an index? What does that comparison tell you?