NISM Certifications · NISM-Series-VIII: Equity Derivatives · Understanding Index
An index has a base market capitalisation of Rs 4,00,000 crore and a base value of 1,000. If the current free-float market capitalisation of its constituents is Rs 10,00,000 crore, with no change in constituents or capital structure, what is the index value?
The index value is 2,500. It 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.
- A2,000
- B2,500Correct
- C1,500
- D4,000
Explanation
Index value = (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. Working backwards, 2,500/1,000 x 4,00,000 = 10,00,000, which matches. A value of 2,000 would result from using a wrong base.
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