How do you calculate stock exchange indexes?

Answer 1

i want to know how can i made stock exchange indexes

Criteria's to select 50 or 30 Companies among NSE / BSE list of Companies

· BSE Listed Companies as on 05 - 10 - 2011 is 5,085.

· NSE Listed Companies as on 05 - 10 - 2011 is 1,552.

ü A company must have one year history as a BSE listed company.

ü A company should be among top 100 in BSE listed companies.

ü A company should be a market leader in the particular sector.

ü Each company should more than 0.5% of total market capitalization of Sensex.

ü A company should have well past record.

ü Company should be traded in each and every day of last one year (Except market holidays).

After sort listing, we go to the calculation of BSE/NSE indexes. Before that we must know what is market capitalization. I would to share that too.

Market capitalization:

Market capitalization is total worth of a company (i.e. outstanding shares of a company). Outstanding shares are nothing but the shares which are not hold by the company or the shares which are hold by public, investors, employees etc.

Formula:

Market Capitalization = No of Shares Outstanding * Market price per share

Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies.

Free Float Market Capitalization

This is directly opposite to the Market capitalization. i.e. Except the Locked Shares (which includes promoter holdings, government holdings).

Free float Market Capitalization = Share Price * (Shares Outstanding - Locked shares) OR

Free float market capitalization =No. of outstanding share * market price of share

Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies.

For Example:

1.XYZ:

Imagine XYZ one of the company (which is among NSE 50 or BSE 30).

XYZ has 1000 shares among that government is holding 300 shares, promoter holding is 500 shares, and 200 shares are available in market and price of a share is Rs. 10.

The calculation would be,

· Market capitalization of the company is 1000 X 10 = 10,000.

· Free float market capitalization of company is 200 X 10= 2,000.

2.ZYX:

ZYX has 2000 shares among that government is holding 500 shares, promoter holding is 500 shares, and 1000 shares are available in market and price of a share is Rs. 20.

The calculation would be,

· Market capitalization of the company is 2000 X 20 = 40,000.

· Free float market capitalization of company is 1000 X 20= 20,000.

Total Market Capitalization

Total Market Capitalization = Market capitalization of NSE 50 / BSE 30 companies.

Total Market Capitalization = XYZ + ZYX + … + ADD UP TO NSE 50 OR BSE 30.

EXAMPLE

Total Market Capitalization = 10,000 (XYZ) + 40,000 (ZYX) + … + ADD UP TO NSE 50 OR BSE 30.

Therefore, Total Market Capitalization = 50,000

Total Free float Market Capitalization = Free float Market capitalization of NSE 50 / BSE 30 companies.

Total Free float Market Capitalization = XYZ + ZYX + …+ ADD UP TO NSE 50 OR BSE 30.

Total Free float Market Capitalization = 2,000 (XYZ) + 20,000 (ZYX) +…+ ADD UP TO NSE 50 OR BSE 30.

Therefore, Total Free float Market Capitalization = 22,000.

Now let us calculate index value of NSE / BSE

Formula for SENSEX calculation:

SENSEX = (sum of free float market cap of 30 major companies of BSE) *

Index value in 1978-79 / Market cap value in 1978-79.

Assume market capitalization is 2000. Now, as per formula:

SENSEX = 100000 X 100 / 2000 = 5000

Value of Sensex is 5000.

Formula for Nifty calculation:

NIFTY = (Sum of free flow market cap of 50 major stocks of NSE) *

Index value in 1995 / market cap value in 1995.

Assuming the market capitalization value during 1995 is 20,000.

NIFTY = 100000 x 1000 / 100000 = 1000.

Value of Nifty is 1000.