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Index Contribution

What is an Index?

Index is an instrument/basket of stocks used to measure the performance of the market or a subset of the stock market & assist investors analyzing the market's health as a whole at a quick glance. Nifty & Bank Nifty are the widely tracked index and one the most heavily traded indices in the world.

How are Indices Calculated?

There are 3 ways indices are calculated

  • Market-Cap Weighted: Stocks with higher market capitalization tend to influence the Index performance swiftly..

  • Equal Weighted: As the name suggests all the components are treated equally & have equal impact

  • Price Weighted: Price is considered as a benchmark in weightage in the Index. Stocks with larger prices have more clout on the Index regardless of other factors.

What is NIFTY50?

NIFTY 50 is a benchmark Indian Stock Market Index representing the performance of Indian Stock Markets. NIFTY 50 shows the weighted average of the top 50 Indian companies from various sectors with the highest free-float market capitalization.

What is Bank Nifty?

BANKNIFTY or NIFTY BANK is an Index derived from the performance of 12 financial stocks shortlisted based on Liquidity & Free Float Market Capitalization. Bank Nifty simply shows the health of the Indian Financial segment.

Interpreting Index Contributions

NIFTY 50 & BANKNIFTY comprise components & have weightage based on Market Capitalization. NIFTY 50 & BANKNIFTY are some of the most traded instruments, trading them without a bias is like skydiving without a parachute.

  • If Index moves higher carried by Heavyweights like RELIANCE, HDFCBANK, HDFC, & more, it increases the quantum of the up-move.

  • If the Index trades positive with heavyweights dragging, it lacks conviction.

  • Bullish move in Index backed up by all sectors providing a positive bias.

  • Stocks with high weightage are likely to influence the quantum of the Index move.

Uses of Index Contributors

Quantsapp’s Index Contribution shows the contribution made by various Stocks towards NIFTY 50 & BANKNIFTY in Real-Time providing us an idea about which stock or sector is moving the Index. RELIANCE the Index heavyweights on multiple occasions has rescued the Index single-handedly with all other stocks dragging.

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