NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
An index has a free-float market capitalisation of Rs 8,00,000 crore today. Its base-period market capitalisation was Rs 2,00,000 crore with a base index value of 1,000. Using the free-float market capitalisation weighted method, what is the index value today?
The index value is 4,000. Divide current free-float market capitalisation of Rs 8,00,000 crore by the base capitalisation of Rs 2,00,000 crore to get 4, then multiply by the base value of 1,000. The index has therefore quadrupled from its base.
- A2,500
- B3,000
- C4,000Correct
- D5,000
Explanation
Index = (current market cap / base market cap) x base value = (8,00,000 / 2,00,000) x 1,000 = 4 x 1,000 = 4,000. Checking backwards: 4,000/1,000 = 4 and 4 x 2,00,000 = 8,00,000. The value 3,000 comes from wrongly using a ratio of 3.
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