NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
A stock index is calculated on the free-float market capitalisation method. The total market capitalisation of its constituents is ₹10,00,000 crore, of which promoters and other locked-in holders own 40%. The base market capitalisation is ₹1,00,000 crore and the base index value is 1,000. What is the index value?
The index value is 6,000. Free-float market capitalisation is 60% of ₹10,00,000 crore, which is ₹6,00,000 crore. Dividing by the base market capitalisation of ₹1,00,000 crore gives 6, and multiplying by the base value of 1,000 gives 6,000.
- A6,000Correct
- B10,000
- C4,000
- D60,000
Explanation
Free-float market cap = 10,00,000 × (1 − 0.40) = ₹6,00,000 crore. Index = (6,00,000 / 1,00,000) × 1,000 = 6,000. Using the full market cap gives 10,000, which ignores the free-float adjustment.
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