A stock market index groups selected stocks into one number so you can see the market’s direction quickly. Instead of tracking many shares, one index shows whether that part of the market is generally going up or down.
An index measures the combined performance of a set of companies. When the prices of the companies in the index change, the index value also changes. It is a simple snapshot of the market or a specific slice of the market (like large companies or a single sector).
Index providers follow simple ground rules so the index stays representative:
For most Indian indices, the value comes from the total free-float market value of all member companies divided by a number called the divisor. The divisor is adjusted for events like stock splits and bonuses so the index doesn’t jump or drop just because the share count changed.
Tip: Match the index to your goal—choose large‑cap, mid‑cap, or sector indices accordingly.
If one stock rises a lot, will the index soar?
Not always. It depends on the stock’s weight and how other stocks are doing.
Do corporate actions (splits/bonus) move the index?
These are adjusted through the divisor so the index stays smooth. Only real price/value changes should move it.
Are all indices the same?
No. Each index has its own rules and purpose. Pick the one that fits your comparison or investment.
| Scenario | Outcome |
|---|---|
| Many heavy-weight stocks rise together | Index usually rises strongly |
| A small-weight stock doubles | Limited effect on the index |
| A sector faces a sudden shock | Sector index falls; broad index impact depends on that sector’s total weight |
| A stock is added or removed in a review | Weights are recalculated; index funds/ETFs rebalance to follow |
| A stock splits 1:1 | Divisor is adjusted; the index stays continuous |
Last updated: 08 Nov 2025