The Index

Luckily you need not actually track these selected companies individually to get a sense of how the markets are doing. The important companies are pre packaged, and continuously monitored to give you this information. This pre packaged market information tool is called the ‘Market Index’. 

There are two main market indices in India. The S&P BSE Sensex representing the Bombay stock exchange and CNX Nifty representing the National Stock exchange.

 S&P stands for Standard and Poor’s, a global credit rating agency. S&P has the technical expertise in constructing the index which they have licensed to the BSE. Hence the index also carries the S&P tag.

 CNX Nifty consists of the largest and most frequently traded stocks within the National Stock Exchange. It is maintained by India Index Services & Products Limited (IISL) which is a joint venture of National Stock Exchange and CRISIL. In fact the term ‘CNX’ stands for CRISIL and NSE.

 An ideal index gives us minute by minute reading about how the market participants perceive the future. The movements in the Index reflect the changing expectations of the market participants. When the index goes up, it is because the market participants think the future will be better. The index drops if the market participants perceive the future pessimistically.