It is a common phenomenon seen in the stock market when foreign portfolio investors synchronise their decisions on what to buy or sell depending on these indices. This means that the movements in Indian indices are reflected through the global indices. The Indian stock market has become more integrated into the global share market post-globalization, and the after-effects have been very visible. While the macroeconomic variables impact a whole economy or sectors, the microeconomic factors focus on the individual equities in question. The Indian stock market is undoubtedly influenced by several variables that include both macroeconomic and microeconomic factors. How do Global Indices Affect the Indian Stock Market? Though one can use various methodologies to construct global indices, the most commonly used indices or methodologies are market cap weighting and free float weighting. This ensures that any heavy impact on indices is not exposed because of small stocks. The primary method used to calculate this index is the weighted average mathematics which usually starts with price-weighted indices and then gradually shifts towards market cap weighted. Global indices are based upon index value calculated on methods decided and approved by the index committee of the specific world share markets. Presented in the form of stocks, bonds, market commodities, etc., index ETFs or funds can be used as a proxy to represent a passive portfolio. Hence, global indices work as a role model for other indices.Ĥ. Other countries often use global and market indices as a reference for their indices. This helps investors understand market performance and health, helping them decide which stock to invest in.ģ. Global indices follow a section of the global financial market and further reflect the market's health and finance. One of the prominent roles that world indices play is that it gives investors an idea of the performances of all stocks in the market.Ģ. Global Indices (live) can be treated as a hypothetical portfolio of financial or global market investments. What is the Role of the Global Indices?ġ. Most of the time, the world stock market is positive if the global indices seem to be moving upwards, while it can be understood that the global markets are weak at the moment given that the global or world stock indices seem to be moving downwards. As these stocks move up or down, they determine the actions of global indices. Usually, a few values of highly liquid and valuable stocks are taken as a sample from listed stocks and converted into an index. Simply put, global or world indices evaluate strengths and weaknesses in overall global markets. Other crucial global stock market indices include Nifty, CAC, DAX, FTSE, and Sensex. The MSCI World index follows mid-cap and large equity throughout 23 developed countries and covers around 85% free adjusted market capitalisation. Global indices keep track of equity performance in share markets of different regions.
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