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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets

A stock index has a base value of 1,000 and a base-period market capitalisation of ₹5,00,000 crore. If the current free-float market capitalisation of its constituents is ₹7,50,000 crore, what is the index value under the free-float market capitalisation weighted method?

The index value is 1,500. Under the market capitalisation weighted method, divide current market capitalisation of ₹7,50,000 crore by base capitalisation of ₹5,00,000 crore to get 1.5, then multiply by the base value of 1,000.

  1. A1,200
  2. B1,500Correct
  3. C1,750
  4. D666.67

Explanation

Index = (current market cap / base market cap) × base value = (7,50,000 / 5,00,000) × 1,000 = 1.5 × 1,000 = 1,500. Checking backwards, 1,500/1,000 × 5,00,000 = 7,50,000. The value 666.67 comes from inverting the ratio.

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