S.

No Stock Name Stock Price as Number of Today's Stock

on January shares in lakhs price(in Rs.)
1,1995(in Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
4 DW 100 30 350
5 EU 250 8 500

Old Shares Old Old Old value of New New New New value of
Price in M.cap(In weights portfolio(Price*Weightage) Price M.cap Weight Portfolio(Price*
lakhs Lakhs) Weightage)
150 20 3000 0.16 23.94 650 13000 0.31 198.82

300 12 3600 0.19 57.45 450 5400 0.13 57.18

450 16 7200 0.38 172.34 600 9600 0.23 135.53

100 30 3000 0.16 15.96 350 10500 0.25 86.47

250 8 2000 0.11 26.60 500 4000 0.09 47.06

18800 1 296.28 42500 1 525.06

Market Capitalization(M.cap) = Number of shares * Market Price

Old value of portfolio is equated to100.Therefore, on that scale new value of

portfolio would be(525.05/296.27)*100 = 177.22

Thus, the present value of index under market capitalizatio0n weighted method is
177.22
Free Float Market Capitalization Index:
In various businesses, Equity holding is divided differently
among various stake holders, promoters, institutions,
corporates, individuals etc. Market has started to segregate this
on the basis of what is really available for trading or what is not.
The one available for immediate trading is categorized as Free-
Float. And, if we compute the index based on weights of each
security based on free float market cap, it is called free float
market capitalization Index. Indeed, both Sensex and Nifty ,
over a period of time, have , moved to free float basis,
SX40,Index of MSEI is also a Free-float market capitalization
Index.
Price Weighted Index:

S.No Stock Name Stock Price as Number of Today's Stock

on January shares in lakhs price(in Rs.)
1,1995(in Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
4 DW 100 30 350
5 EU 250 8 500

Stock Stock Price Price Today's Price Price

Name Price as Weights Weighted Stock Weights Weighted
on prices Price(in Prices
January Rs.)
1,1995(in
Rs.)
AZ 150 0.12 18 650 0.25490 166

BY 300 0.24 72 450 0.17647 79

CX 450 0.36 162 600 0.23529 141

DW 100 0.08 8 350 0.13725 48

EU 250 0.2 50 500 0.19607 98

1250 310 2550 532

We Equate 310 to 100 to find the current value, Which would
be(532/310)*100=171.7268

Dow Jones Industrial Average and Nikkei 225 are popular price Weighted indices.

Equal Weighted Index:

S.No Stock Name Stock Price as Number of Today's Stock

on January shares in lakhs price(in Rs.)
1,1995(in Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
4 DW 100 30 350
5 EU 250 8 500

The value of the index is generated by adding the prices of each stock in
the index and dividing that by the total number of stocks.

Base level of the Index would be (150+300+450+100+250)/5 = 250. We

equate this to 100.

Current level of this index would be (650+450+600+350+500)/5 = 510.

It means the current level of index on the base of 100 would be
(510/250) * 100 = 204.