A stock market index is defined as a collection of certain shares chosen based on certain characteristics such as trading frequency, share size and others. They are used to depict the market direction and change through an index.
Read further the detailed analysis of Global Stock market indexes of 2023 by Upmarket Academy.
What is the stock market index?
The statistic that measures the fluctuations of the financial market is called a stock market index. In other words, they are performance indicators that indicate the performance of a certain market segment or the entire market.
How are stock market indexes constructed?
A stock market index is constructed by choosing equities from companies that match the predetermined criteria, or sometimes, equities are chosen from similar companies. In addition, the shares of these companies are already listed on the stock exchanges and are traded regularly. Finally, the share market indexes are built on predetermined criteria such as variables, industry segments, or market capitalization.
What is the use of stock market indexes?
Stock market indexes are used to track the price movement and performance of the stock which comprises the index. In short, the success of any stock market index is directly proportional to the performance of stocks that constitute the index. In other words, if the prices of the stocks in an index rise, the index rises as a whole.
Types of Stock Market Indices
There are several types of stock market indexes, and they are divided based on their purpose.
- Sectoral Index
Indexes that indicate the performance of a specific sector, that is, the stocks listed in the sectoral Index, belong to the same sector and their performance is considered as the indication of the performance of that particular sector.
For example, S&P BSE Healthcare and NSE Pharma are famous as indicators of the pharmaceutical sector. Likewise, s&P BSE PSU and Nifty PSU are indicators of the public banking sector.
- Benchmark Index
Indicators consist of a specific number of stocks that indicate the best-performing equities. These group equities are known as benchmark indexes because they employ the best standard to regulate selected companies. Therefore, they are regarded as the best and most reliable information source about the market. For example, the Nifty 50 index consists of the top 50 best-performing equities, and the BSE Sensex index consists of 30 best-performing stocks.
- Market Cap Index
Companies in the Market cap index are selected by the indices based on Market Capitalization. Market capitalization is defined as any publicly traded corporation’s stock exchange market value. For example, S&P BSE and NSE small cap 50 are companies with lower market capitalization, and it is defined by the Securities Exchange Board of India (SEBI).
- Other Kinds of Indices
There are several other market indices, such as S&P BSE 500, and S&P BSE 100, with more stocks listed. This helps investors to focus and invest in areas that they feel are secure.
Global stock market index
- US MARKETS
The US market consists of a wide range of indexes and different methodologies to categories with a broad range of purposes. Though a wide range of indexes is available, media reports often about top3 indexes throughout the day.
Some of the most used indexes in the US Market are given below.
- The S&P 500
The S&P 500 refers to the standard and Poor’s 500, an index with 500 of the top companies in the United States stocks. It is chosen based on capitalisation and other factors such as sector classification, trading history, financial viability, etc. The S&P 500 Index represents around 80% of the total value of the U.S. stock market.
- The Dow Jones Industrial Average
DJIA is famous as one of the oldest and most well-known indexes. The Dones Jones Industrial Average includes the stocks of 30 companies. These are the most influential companies in the U.S.
- The Nasdaq Composite Index
Nasdaq is one of the most popular and trusted indexes. This is the index based on which technology stocks are traded. There are non-U.S-based companies in this index. Although it is a heavily tech-weighted index, there is room for other stocks, such as financials, industrials, insurance, and transportation stocks
- The Wilshire 5000
The Wireshark 5000 is also known as the total stock market index, including all publicly traded companies. The index includes almost all the companies headquartered in the United States and has readily available price data. This index represents the entire U.S. stock market and its movement aggregately.
- EUROPEAN MARKETS
The European market includes several indexes with varying stocks listed on them. In addition, indexes with a few stocks, like 50, and 100,500 stocks are listed.
Some of the important European Stock indexes are listed below
- FTSEurofirst 300 Index
The British provide the Financial Times Stock Exchange with a large operating premise in Canary Wharf. FTSE operates around 250k indices across 80 countries. It was the third provider of indices worldwide by revenue in the year 2015. The company earns around 60 per cent of its revenue from annual subscription fees and 40 per cent from licensing for index-based products.
- EURO STOXX 50
EURO STOXX 50 is owned by Deutsche Börse Group and is designed by STOXX. It is a stock index of Eurozone stocks. The index consists of 50 stocks from 11 counties that come under the umbrella of the Eurozone. The index mainly represents blue-chip companies considered leaders of the respective sector. In addition, the index comprises the 50 largest and most traded liquid stocks.
- UBS 100 Index
UBS 100 is the Swiss share index and was launched in April 1987. The index tracks 100 Swiss companies with the largest market capitalizations. These companies are listed on the SIX Swiss stock exchange. UBS covered 98% of Swiss companies’ publicly traded shares in 2022 as measured by free-float market capitalization.
- ASIAN MARKETS
Like the US and European Stock exchange indexes, Asia is home to several stock exchanges and hence, stock indexes.
Asia’s prominent stock market indexes are given below
- SGX Nifty
SGX means Singapore stock exchange, and the index SGX Nifty is a derivative of the Nifty trade index within SGX. SGX Nifty Transactions are settled in the Singapore Exchange. As a result, SGX Nifty is more volatile compared to its contemporaries.
- Nikkei 225
The Nikkei Index is referred to as Nikkei 225 and is one of Japan’s most recognized stock market indexes. The index comprises 225 top Japanese companies listed on the Tokyo Stock exchange.
- Nifty 50
Nifty 50 is owned by the National Stock Exchange indices of India. It was previously known as the Indian Index Services and Products Limited. The Nifty 50 index was launched on 22 April 1996 and is one of the prominent stock indices of Nifty. It covers 13 sectors of the Indian economy and manages the exposure to the Indian market in a single portfolio. Nifty 50 is a free-float market capitalization-weighted index initially calculated using a market capitalization methodology.
So, the global stock market indexes for 2023 present a landscape of both opportunities and risks for investors. At Upmarket Academy, we provide investors with the tools and knowledge to analyze these indexes and make informed investment decisions. Join us today to gain a competitive edge in the global market.