How is the market doing today?

Watch how the question gets answered.

India has thousands of listed companies: about **5,000** on the BSE and about **2,000** on the NSE. Checking every one to answer "how's the market today?" would take all day.

Instead, pick a few **important companies across key industries** and watch them together. That small, carefully chosen group is a **stock market index**.

Like checking a few main junctions to judge a whole city's traffic.

Read the market

Drag to set how many are rising.

Your index has 10 important stocks. Set how many of them rose today.

**Remember:** an index is a quick summary of many stocks. Real indices also count bigger companies more; that's two lessons from now.

India's two main indices

• Sensex BSE · 30 stocks — The Bombay Stock Exchange's main index, built from 30 large companies.
• Nifty 50 NSE · 50 stocks — The National Stock Exchange's main index, built from 50 of its largest and most traded companies.

Both are **broad** indices: their companies come from many industries, so together they stand for the whole market. Members must meet rules to get in, and are replaced if they stop meeting them.

**Remember:** the number in the name is how many stocks are in the index.

Points and per cent

Switch between the two periods.

An index is a number measured in **points**, and it changes all day. We describe a move in points and as a percentage. A rising index means people feel **optimistic** about the future; a falling one means **pessimistic**.

Real Nifty values from 2014.

Bull, bear or sideways

Switch between the three markets.

Traders have names for the direction an index takes over a period.

Made-up index paths.

What people use an index for

• Information — A quick read on the whole market and the mood about the economy.
• Benchmarking — A yardstick for your own returns. You'll try this in two lessons.
• Trading — Many traders buy or sell the index itself, through derivatives, a topic for later.
• Hedging — Investors can use the index to protect a portfolio in a long fall, also for later.

Check — Question 3 of 4

Put each one where it belongs.

What you now know

• An index is a small, chosen group of important stocks that sums up the market.
• India's two main indices are the Sensex (30 stocks, BSE) and the Nifty 50 (50 stocks, NSE).
• An index is measured in points; moves are described in points and per cent.
• A rising index signals optimism; a falling one, pessimism.
• Bull = rising over a period; bear = falling; sideways = going nowhere.
• Indices are used for information, benchmarking, trading and hedging.