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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Understanding Index

A market-cap weighted index has a base date market capitalisation of Rs 4,00,000 crore and a base value of 1,000. If the current total market capitalisation of its constituents is Rs 10,00,000 crore, with no adjustments needed, the current index value is:

The index value is 2,500. The index equals current market capitalisation divided by base market capitalisation, multiplied by the base value: 10,00,000 divided by 4,00,000 is 2.5, and 2.5 times 1,000 gives 2,500.

  1. A2,500Correct
  2. B1,400
  3. C2,000
  4. D250

Explanation

Index = (current market cap / base market cap) x base value = (10,00,000 / 4,00,000) x 1,000 = 2.5 x 1,000 = 2,500. Check: 4,00,000 x 2.5 = 10,00,000. Option 2,000 comes from wrongly using a ratio of 2; 250 misplaces the decimal.

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