Video Discription |
The different types and classification of Indices in Financial Markets:
1. Broad Market Index
Comprises of the most liquid stocks from the investible universe across various cap sizes, i.e. large-cap, mid-cap, small-cap and micro-cap. Provides broad exposure to core equities in the market. Serves as a market benchmark to track portfolio performance. Several Index Funds and ETFs are linked to these broad-based indices.
2. Sectoral Index
Comprises of companies engaged in a particular industry or sector. Nifty indices cover 13 sectors, i.e. Auto, Banks, Financial Services, FMCG, Healthcare, IT, Media, Metal, Pharma, Realty, Consumer Durables, Oil & Gas. There are two important Classification Systems for Sectoral Indices: Global Industry Classification Standard (GICS) - created by S&P and MSCI in 1999, and Industry Classification Benchmark (ICB) - created by FTSE and Dow Jones in 2005.
3. Thematic Index
Represent the performance of companies that contribute a movement towards a specific theme. Popular themes today include ESG, Climate Change, Low Carbon, Net Zero 2050, Clean Energy, Clean Tech, Gender Equality, Diversity & Inclusion, etc.
4. Strategy Index or Factor Index
Designed based on complex quantitative models and investment strategies that provide a single value for the aggregate performance of various companies. Constituent selection is based on one or more factors such as Quality, Value, Size, Growth, Volatility, Momentum, Alpha. Factor Investing is a systematic framework that involves targeting a set of quantifiable firm characteristics called factors, which explain the risk- return profile of an investment.
5. Fixed Income Index
Benchmark for debt markets and fixed income securities such as government securities, treasury bills, corporate bonds, certificate of deposit, commercial paper, overnight rate, etc.
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