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

Index value = 22,000 now. A stock's free-float market cap is Rs 11,000 crore in an index whose total free-float market cap is Rs 5,50,000 crore. What is the weight of this stock in the index?

The stock's weight is 2%. In a free-float market-cap weighted index, weight equals the stock's free-float market capitalisation divided by the index total, which is 11,000 divided by 5,50,000, giving 0.02. The index level itself is irrelevant to this calculation.

  1. A0.5%
  2. B1%
  3. C2%Correct
  4. D5%

Explanation

Weight = stock free-float market cap / total index free-float market cap = 11,000 / 5,50,000 = 0.02, i.e. 2%. Check: 2% of 5,50,000 = 11,000. The index value is not needed. Choosing 0.5% would come from dividing wrongly by 22,00,000.

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