NISM Certifications · NISM-Series-VIII: Equity Derivatives · Understanding Index
An index has a base value of 1000 and a base market capitalisation of Rs 50,000 crore. If the current free-float market capitalisation of its constituents is Rs 85,000 crore, what is the index value?
The index value is 1,700. It is computed by dividing the current free-float market capitalisation of Rs 85,000 crore by the base market capitalisation of Rs 50,000 crore, giving 1.7, and multiplying by the base value of 1000.
- A1,700Correct
- B1,176
- C850
- D1,850
Explanation
Index = (current market cap / base market cap) x base value = (85,000 / 50,000) x 1000 = 1,700. Option 1,176 results from inverting the ratio (50,000/85,000 x 2000 style error). Option 850 uses the wrong base of 500.
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