Stock index is average of stock prices and stock value. We can calculate it either using of price weighted method or market capital weighted index method.

Price Weighted Method

In price weighted index method, we take the sum of 30 stocks of popular companies (in India, we take sum of 50 popular companies' stock price. Now, we will divide it index divisor

Outside India

Sum of Stocks of 30 companies / Index Divisor = Index Average.

Index divisor is Dow Jones Industrial Average

In India

Sum of Stocks of 50 companies/ Index Divisor = Index Average.

Index divisor is Index value in base period / Stock price in base period, it may be 1978-79 or 1995

Market capitalization

In this method, we calculate market capitalization of famous companies. It may be 30 or 50.

= No. of shares outstanding X market price of share

Sum of Market Caps / Divisor = Stock Index Average

or India

Sensex = (Sum of free float market cap of 50 major companies of BSE) X Index Value in 1978-79 / Market cap value in 1978-1979

NIFTY =   (Sum of free flow market cap of 50 major companies of NSE) X Index Value in 1995/ Market cap value in 1995

Related Contents

.

## \$type=three\$a=hide\$cm=hide\$s=hide\$show=/2019/06/10-steps-to-become-better-investor.html\$l=hide

Name

false
ltr
item
Accounting Education: How to Calculate Stock Index
How to Calculate Stock Index
https://3.bp.blogspot.com/-wSyLqq3nv98/V_iaRNNPoMI/AAAAAAAAUu8/BquW0AaCHvg4uDQ9l6MvFQKQCgYtBDK-ACLcB/s400/smi.jpg
https://3.bp.blogspot.com/-wSyLqq3nv98/V_iaRNNPoMI/AAAAAAAAUu8/BquW0AaCHvg4uDQ9l6MvFQKQCgYtBDK-ACLcB/s72-c/smi.jpg
Accounting Education
https://www.svtuition.org/2016/10/how-to-calculate-stock-index.html
https://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2016/10/how-to-calculate-stock-index.html
true
2410664366776677676
UTF-8