INDICES

• Free Float Methodology

• 1. What is a Free-float index?

• 2. Is Free-float SENSEX a new Index?
• 3. Will the new methodology change the SENSEX value
on the day of implementation?
• 4. Why a Free-float based Index?
• 5. What are the major advantages of a Free-float Index?
• 6. Is Free-float a globally accepted indexing
methodology?
• 7. Are there any Free-float indices in India currently?
• 8. How does BSE determine the Free-float factor for
each Index Company?
• What should a stock market index be?
• What do the ups and downs of an index mean?
• What is the basic idea in an index?
• What kind of averaging is done?
• What is the portfolio interpretation of index movements?
• Why are indices important?
• What kinds of indices exist?
• What is wrong with the price information for illiquid stocks?

• A stock may be liquid on one exchange and illiquid on

another -- what price do you take when calculating the
index?
• What is `stale prices'?
• What is `bid-ask bounce'?
• What about market manipulation - how would manipulation
of an index take place, and how would an index be made
less vulnerable to manipulation?
• So diversification yields diminishing returns, and illiquid
stocks are best kept out of an index.... what is the ideal
middle road?
• How is the S&P CNX Nifty closing price calculated?
• What is special about the NSE closing price?
• What about dividends?
• You say that buying a S&P CNX Nifty portfolio yields the
same returns as percentage changes on the S&P CNX
Nifty index. But the weights will have to keep on changing
from day to day when market caps change?
• So when do weights in an index change?
• What historical data for the S&P CNX Nifty is available?
• Where do I get data for the S&P CNX Nifty?
• Isn't averaging like diversification; canceling out
vulnerability to one stock?
• Then a larger number of stocks in an index will give more
diversification -- isn't that a good thing? Why don't we put
all the stocks of the country into the index?
• What about index futures?
• What is hedging effectiveness?
• Why not form a small portfolio of the ten most liquid
stocks, and work to ensure that the small portfolio is
maximally correlated with the S&P CNX Nifty?
• Why does the index keep changing from time to time?
• When a stock goes out and a new stock comes in, doesn't
that make index levels non-comparable?
• Index revision sounds dangerous in terms of political
pressures. Won't speculators try to push a stock they have
purchased into the index? Or remove a stock from the
index when they are shorting it?
• How did the S&P CNX Nifty come about?
• Where does IISL come in?
• Who is Standard & Poors, and why does their name
appear with the S&P CNX Nifty's?
• What does CNX in "S&P CNX Nifty" stand for?
• We sometimes hear the term `nifty fifty' used in the US to
denote a certain set of growth stocks. Is there any
connection?
• What's S&P CNX Defty?
• What's S&P CNX 500?
• What's CNX Nifty Junior?
• What's CNX MidCap 200?
• What's CNX Segment Indices?
• What's CNX IT Index?
• How does the S & P CNX Nifty work?
• What is `impact cost'?
• What do you mean by `an S&P CNX Nifty trade'?
• What's the impact cost on Rs.5 million of the full S&P CNX
Nifty?