We recommend reading this chapter on Varsity to learn more and understand the concepts in-depth.

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Key takeaways from this chapter

1. An index acts as a barometer of the whole economy.
2. An index going up indicates that the market participants are optimistic.
3. An index going down indicates that the market participants are pessimistic.
4. There are two main indices in India – The BSE Sensex and NSE’s Nifty
5.  An index can be used for a variety of purposes – information, benchmarking, trading and hedging.
6.  Index trading is probably the most popular use of the index.
7. India follows the free-float market capitalization method to construct the index.
8.  There are sector-specific indices which convey the sentiment of specific sectors.