My question is to how we determine the price of an Index say for ex., Nifty 50, Sensex, Bank Nifty etc., and does it involves stocks from each and every sector or only few selected sectors or only stocks of sectors which are bluechip?
Please clarify and if an example can be shared as to how the calculation is done it would be a great help. Thank you.
There are few stocks selected from market. so that it can provide a broad view of the market. Index can be formed in various manner like price weighted, mkt weighted etc. Like nifty has 50 stocks comprising of many sectors. Bank nifty is focused on banking sector, it has top banks in its composition.
So, it’s not necessary that an Index will represent all the sectors of an economy, right?
No some index are broad some are narrow.