Same move, very different effect

Watch both stocks rise.

The Sensex and Nifty don't treat every member equally. Watch two members of one index rise by the same 5%.

Each member has a **weight**: how much it counts. A heavyweight's move lifts the index far more than a lightweight's.

Weight comes from size

A company's weight comes from its **free-float market capitalisation**, its value in the market:

• Free-float market cap = shares available in the market × share price — A company with 100 shares in the market at ₹50 each has a free-float market cap of ₹5,000.

Add up the free-float market caps of every member. Each company's **weight** is its share of that total. Bigger company, bigger weight.

**Remember:** it's the company's total value that counts, not its share price.

Move one member

Pick a company, then choose its move.

A mini index of four companies at **10,000 points**. Each row shows shares in the market × price = free-float market cap, and the weight that gives.

Made-up companies.

The real Nifty's heavyweights

Switch between the top and the bottom.

Here are actual Nifty 50 weights from mid-2014.

Nifty 50 weights, mid-2014. Weights change every day as prices move.

Price isn't size

Switch between the two ways of weighing.

Last lesson's index added up **prices**. The Sensex and Nifty add up **company values**. For the same four companies, the weights come out very differently.

What you now know

• Index members don't count equally; each has a weight.
• Free-float market cap = shares available in the market × price.
• A member's weight = its free-float market cap ÷ the total of all members.
• Index move ≈ weight × the stock's move, so heavyweights move the index most.
• The Sensex and Nifty weigh by company value, not share price.
• In 2014 the Nifty was most sensitive to ITC and least to DLF.