Stock Market Quotations and Indices

Stock Market Quotations and Indices

In stock exchanges, continuous trading in securities takes place and these trades occur at different prices. As a result, even on a single day, prices of securities may fluctuate. On any trading day, four prices can be easily identified, namely, opening price, closing price, the highest price of the day and the lowest price of the day. Apart from these short-term intra-day fluctuations, prices of securities exhibit certain secular trends when considered over a fairly long period of time. Prices may gradually increase over a long-term period; or they may decline over the long-term period. Ordinarily, prices move in a cyclical fashion, alternatively showing increasing and declining tendencies.

The short-term as well as long-term fluctuations in prices of securities are indicators of the variations in the underlying economic variables. Hence, it is necessary to closely observe and monitor the movement of prices in the securities market. Price information becomes quite valuable for this purpose. Price quotations of traded securities are available from the stock exchanges and are being published daily by most of the newspapers. Financial dailies give very detailed price quotations (opening and closing prices, highest and lowest prices, 52-week high and low prices, etc.), including the data on volume of daily trading.

In addition to the price quotations of individual ‘securities, stock exchanges make available stock market indices, which are useful in understanding the level of prices and the trend of price movements of the market as a whole. Stock market indices are meant to capture the overall behaviour of equity markets.

A stock market index is created by selecting a group of stocks that are capable of representing the whole market or a specified sector or segment of the market. The change in the prices of this basket of securities is measured with reference to a base period. There is usually a provision for giving proper weights to different stocks on the basis of their importance in the economy. A stock market index acts as the indicator of the performance of the overall economy or a sector of the economy.

The Stock Exchange, Mumbai (BSE) came out with a stock index in 1986, which is known as BSE SENSEX. It is an index composed with 30 stocks representing a sample of large, well-established and financially sound companies selected from different industry groups. The base year of BSE SENSEX is 1978-79 and the base value is 100.

The launch of BSE SENSEX in 1986 was followed up in January 1989 by another broader index, namely BSE National Index, comprising 100 stocks listed at five major stock exchanges in India at Mumbai, Kolkata, Delhi, Ahmedabad and Chennai. The base year of the BSE National Index was selected as 1983-84, and the base value was taken as 100. This index was renamed in October 1996 as BSE-100 index and is now calculated by taking the prices of 100 stocks listed at BSE only.

In 1994, two new index series, namely the BSE-200 and the Dollex-200 indices were launched by BSE. Meanwhile, there has been a steady increase in the number of listed companies and the market capitalisation of companies. New industry groups were also emerging.

The Stock Exchange, Mumbai, has been increasing the range of its indices with segment specific and sector specific indices such as BSE-PSU index to meet the requirements of market participants for more specific information on the market activities.

The major stock market indices available at the National Stock Exchange (NSE) are:

S and P CNX Nifty

CNX Nifty Junior

S and P CNX 500

CNX Midcap 200

5 and P CNX Defty.

S and P CNX NIFTY

It is an index calculated with a well-diversified sample of fifty stocks representing 23 sectors of the economy. The base period selected for Nifty is the close of prices on November 3, 1995, which marks the completion of one year of operations of NSE’s capital market segment. The base value of the index has been set at 1000.

Nifty is managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. The index is known as S and P index because IISL has consulting and licensing agreement with Standard and Poor’s (S and P), who are world leaders in index services.

It is composed of the next most liquid fifty securities so much so S and P CNX Nifty and CNX Nifty Junior together account for the hundred most liquid securities traded at NSE. The two indices are constituted in such a way as to be disjoint sets, that is, a stock will never appear in both the indices at the same time.

CNX MIDCAP 200

It is designed to capture the movement of the mid cap segment or medium-sized capitalisation companies. The medium capitalisation segment of the stock market is being perceived increasingly as an attractive investment segment with high growth potential.

The regional stock exchanges also bring out stock indices calculated from stocks listed and traded at those exchanges. Many prominent financial dailies also bring out their own stock market indices.

The price quotations and market index values are useful to investors and market analysts to understand the mood of the market and to take appropriate investment decisions.