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NISM Certifications · NISM-Series-VIII: Equity Derivatives · Understanding Index

An index has two stocks, A and B, with index market caps of Rs 60,000 crore and Rs 40,000 crore, giving an index value of 1,000. Stock A rises 10% and stock B falls 5%, with no other change. Assuming the divisor stays unchanged, what is the new index value?

The new index value is 1,040. Stock A's cap rises to Rs 66,000 crore and B's falls to Rs 38,000 crore, totalling Rs 1,04,000 crore, which is 4% above the original Rs 1,00,000 crore, so the index rises from 1,000 to 1,040.

  1. A1,025Correct
  2. B1,040
  3. C1,050
  4. D1,075

Explanation

New cap of A = 60,000 x 1.10 = 66,000. New cap of B = 40,000 x 0.95 = 38,000. Total = 1,04,000 against the original 1,00,000, so index = 1,000 x 1.04 = 1,040. Hence 1,040 is the result; using the correct working, the answer is 1,040 and not 1,025.

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