- Posted by: admin
- Category: Analysis
This article is basically an analysis of the Stock Market Index over the past few years. But before we go into that let me, in brief, explain what a stock market index is.
A stock market index is created by selecting a group of stocks that are representative of the whole market or a specified sector or segment of the market. It is calculated with reference to a base period and a base index value.
It is used to give information about the price movements of products in the financial, commodities or any other markets and is meant to capture the overall behavior of the equity markets.
BSE Small Cap Index:
Firstly we’ll be analyzing the BSE Small Cap Index.
Term a bit too heavy?
Let me simplify it by explaining the term. BSE Small Cap Index is an index to track the performance of companies with relatively smaller market capitalization. Small Cap Companies have smaller revenue and client bases, and usually, include the start-ups or companies in the early stage of development.
All BSE indices (except BSE-PSU index) are calculated using following formula:
Free-float market capitalization of index constituents/ Base Market capitalization * Base Index Value
(Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks.)
(market cap video link)
Therefore keeping in mind the closing value of the BSE Small Cap Index, following are the Quarterly, Half-Yearly and Yearly percentage change in the index value of the close between 2010 and 2016.
As an Investor, percentage change lets you compare results from different stock investments.
The negative returns indicate that the company shares comprising the index were traded at a loss, while the positive returns of the index indicate that the company shares traded on that index were profitable.
Half Yearly Results:
NSE Mid Cap:
Now we move into the analysis of NSE Mid Cap. Like the BSE Small Cap Index, NSE Mid Cap Index tracks the performance of the companies which fall in the mid cap segment of the market. The NIFTY Full Midcap 100 Index comprises 100 tradable stocks listed on the National Stock Exchange (NSE). It also includes all companies from NIFTY Midcap 50. The remaining companies are selected based on average daily turnover from NIFTY Midcap 150 index.
(The number of shares of a security traded each day averaged over some period of time is the average daily turnover.)
Therefore keeping in mind the closing value of the NSE Mid Cap Index, following are the Quarterly, Half-Yearly and Yearly returns between 2007 and 2015.
Half Yearly Results:
The NIFTY 50 is a diversified 50 stock index accounting for 13 sectors of the economy. NIFTY 50 is owned and managed by India Index Services and Products Ltd. (IISL). IISL is India’s specialised company focused upon the index as a core product. NIFTY 50 is ideal for derivatives trading.
Therefore keeping in mind the closing value of the NIFTY 50 Index, following are the Quarterly, Half-Yearly and Yearly percentage change in the index value between 2007 and 2016.
Half Yearly Results:
The following table shows the returns available from the various stock indices after 2 years, 5 years and 9 years.
The following graph shows the performance of the index between 2008 and 2016.
The yearly returns of the BSE Small Cap Index have shown wide fluctuations and the index can be safely concluded as highly volatile. A highly volatile share is one that hits new highs and lows, moves erratically, and experiences rapid increases and dramatic falls.
The NSE Mid Cap has mostly recorded high positive returns or very low negative returns. In the year ending March 2010, it even went up to record a return of 99.57%. However an important point to remember is that stock market returns are not fixed and are subject to market risks.
The Yearly returns on the NIFTY 50 over the years have progressed to record a low negative returns or positive returns. Money invested in good stock with long-term prospective always gives better return.