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

An index has two stocks. Stock A has free-float market cap Rs 600 crore and falls 5%. Stock B has free-float market cap Rs 400 crore and rises 10%. If the index was at 2000 before these moves, what is the new index value, assuming no other changes?

The new index value is 2020. Stock A falls to Rs 570 crore and Stock B rises to Rs 440 crore, giving total capitalisation of Rs 1010 crore, a 1% gain over Rs 1000 crore. Applying 1% to 2000 gives 2020. Weights matter, not a simple average.

  1. A2020Correct
  2. B2050
  3. C2100
  4. D2010

Explanation

Total cap before = 1000 crore. A falls to 570 crore (600 x 0.95). B rises to 440 crore (400 x 1.10). New total = 1010 crore, a 1% rise. New index = 2000 x 1.01 = 2020. A simple average of -5% and +10% gives 2.5% and index 2050, which ignores weights.

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