BSE Sensex and NSE Nifty

The persons connected to the stock exchange activities know about both these indices. I am going to open a new topic for discussion related to its composition.

Both these indices are composed of the securities (shares) of fifty reputed companies, from diverse business sectors. This composition is reviewed periodically, the worse performing companies are removed and other better performing companies are included in those indices.

This practice helps show a better picture of the capital market. But that may not be necessarily the true picture of the whole market. The performance of thousands of other companies listed on the stock exchange is not reflected in those indices. Therefore I call both these indices as the 'Partial Indices'.

To overcome this lacuna, I suggest to introduce another index, by whatever name found suitable, which will cover all companies which are listed on the stock exchange and have collected the money from the public in the past. All such companies should be included in the index, irrespective of whether there occurs trading in the shares of those companies or not. The reason of doing so is that the money of the public was used and still remains blocked in those shares. The loss to the shareholders due to shares being traded below the offer price remains a matter of concern.

The 'Complete Index' which I suggest to introduce should be such that it will be based on the weighted average value of the shares of all companies listed on the stock exchange. Some norms will need to be determined for considering the valid price of shares of the companies not having been traded for many days.

The Complete Index =
(the sum of the value of shares of all listed companies, based on the latest market price)
divided by
(the sum of the value of shares of all listed companies, based on the offer price)

This is an approximate indication of the expected index. At this stage, I have not given any name to this index. Any suitable name can be assigned later. While the calculation is being done for the Sensex and the Nifty, calculating such a new index on daily basis should not be a big problem. Such a 'Complete Index' also should be declared beside the Sensex and Nifty. This much should be made a mandatory condition for the stock exchanges. That will help the small investors compare both and judge the real situation of the capital market. Will the SEBI do the needful for this purpose ?

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Last updated on 2022.08.21. (First uploaded here on 2022.08.21.)
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