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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets

Which statement about the role of a stock exchange index such as the Nifty 50 is most accurate?

A stock market index like the Nifty 50 is a statistical measure of price movement of a basket of representative stocks. It is used as a market benchmark to compare portfolio performance. It does not guarantee returns on any constituent stock.

  1. AIt guarantees the return of every constituent stock
  2. BIt is a statistical measure of the price movement of a basket of representative stocks and is used as a market benchmarkCorrect
  3. CIt is the price at which the RBI buys equity from banks
  4. DIt is a fixed-income instrument issued by SEBI

Explanation

An index tracks the combined price movement of a selected basket of stocks and serves as a benchmark for portfolio performance. It does not guarantee returns, and it is neither issued by SEBI nor linked to RBI purchases.

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