How to Calculate a Stock Price Index

A stock price index is a good way to measure any subsection of the stock market, from a particular industry to market size. Common indexes are the Wilshire 5000 or the S&P 500. The most popular and quoted index is the Dow Jones Industrial Average (DJIA), which is a price-weighted index of 30 blue chip stocks.

Step 1- Gather the stock price information for five listed stocks of your choice going back 20 days or one month. You can find this information on Yahoo! Finance by entering a ticker symbol in "Get Quotes" and clicking on "Historical Prices" in the left-hand pane. You will also need the number of shares outstanding.

Step 2- Choose a starting point or base period for your stock. It can be the first day of the range selected in Step 1. Create three columns in a spreadsheet or on paper. Make one column for the date (Column A), one for the stock (Column B) and one for the price of the stock (Column C).

Step 3- Sum Column C (the price of the stock) and divide by five (the number of stocks in your index). This is your price-weighted average. Those stocks with higher prices will affect this average more than price fluctuations in lower-priced stocks. It is the easiest way to calculate stock price index; however, it does not take the size of the company into consideration.

Step 4 - Calculate market value weighted index. Unlike the price weighted index, the market value weighted index considers company size. Create a Column D with the number of shares outstanding for each stock in the price weighted index. Multiply the number of shares (Column D) by the price (Column C). This is the market capitalization. Let's name this Column E. Sum Column E and divide by five. This is the market value weighted index. A small change in price for a big company will have a greater affect on the value of the overall index value for a market weighted index. This is also known as a capitalization value-weighted index.

Step 5 - Calculate a modified market capitalization stock index. This is a combination of the price and market-value weighted index. It is calculated in the same way as a market-value weighted index, but a cap (or limit) is set on the largest stocks. Using the example above, you can use an arbitrary cap of 25 percent of the total index value. That is, any stock that represents over 25 percent of the average of Column E should be capped for price fluctuations. This has the affect of "un-weighting" the larger market cap stocks in your index. 

Name of 50 companies listed in NSE & 30 companies listed in BSE

Nifty 50
Company Name Industry

ABB Ltd. Electrical equipment
ACC Ltd. Cement and cement products
Ambuja Cements Ltd. Cement and Cement Products
Bajaj Auto Ltd. Automobiles - 2 and 3 Wheelers
Bharat Heavy Electricals Ltd. Electrical Equipment
Bharat Petroleum Corporation Ltd. Refineries
Bharti Airtel Ltd. Telecommunication - Services
Cipla Ltd. Pharmaceuticals
Dr. Reddy's Laboratories Ltd. Pharmaceuticals
GAIL (India) Ltd. Gas
Glaxosmithkline Pharmaceuticals Ltd. Pharmaceuticals
Grasim Industries Ltd. Cement and Cement Products
HCL Technologies Ltd. Computers - Software
HDFC Bank Ltd. Banks
Hero Honda Motors Ltd. Automobiles - 2 and 3 Wheelers
Hindalco Industries Ltd. Aluminium
Hindustan Petroleum Corporation Ltd. Refineries
Hindustan Unilever Ltd. Diversified
Housing Development Finance Corporation Ltd. Finance - Housing
I T C Ltd. Cigarettes
ICICI Bank Ltd. Banks
Infosys Technologies Ltd. Computers - Software
Larsen & Toubro Ltd. Engineering
Mahanagar Telephone Nigam Ltd. Telecommunication - Services
Mahindra & Mahindra Ltd. Automobiles - 4 wheelers
Maruti Udyog Ltd. Automobiles - 4 wheelers
NTPC Ltd. Power
National Aluminium Co. Ltd. Aluminium
Oil & Natural Gas Corporation Ltd. Oil Exploration/Production
Punjab National Bank Banks
Ranbaxy Laboratories Ltd. Pharmaceuticals
Reliance Communications Ltd. Telecommunication - Services
Reliance Energy Ltd. Power
Reliance Industries Ltd. Refineries
Reliance Petroleum Ltd. Refineries
Satyam Computer Services Ltd. Computers - Software
Siemens Ltd. Electrical Equipment
State Bank of India Banks
Steel Authority of India Ltd. Steel and Steel Products
Sterlite Industries (India) Ltd. Metals
Sun Pharmaceutical Industries Ltd. Pharmaceuticals
Suzlon Energy Ltd. Electrical Equipment
Tata Consultancy Services Ltd. Computers - Software
Tata Motors Ltd. Automobiles - 4 Wheelers
Tata Power Co. Ltd. Power
Tata Steel Ltd. Steel and Steel Products
Unitech Ltd. Construction
Videsh Sanchar Nigam Ltd. Telecommunication - Services
Wipro Ltd. Computers - Software
Zee Entertainment Enterprises Ltd. Media & Entertainment

BSE 30
ACC Ltd. Cement and cement products
Ambuja Cements Ltd. Cement and Cement Products
Bajaj Auto Ltd. Automobiles - 2 and 3 Wheelers
Bharat Heavy Electricals Ltd. Electrical Equipment
Bharti Airtel Ltd. Telecommunication - Services
Cipla Ltd. Pharmaceuticals
DLF Ltd. Developers/Construction
Grasim Industries Ltd. Diversified
Housing Development Finance Corporation Ltd. Finance - Housing
HDFC Bank Ltd. Banks
Hindalco Industries Ltd. Aluminium
Hindustan Unilever Ltd. FMCG
ICICI Bank Ltd. Banks
Infosys Technologies Ltd. Information Technology
ITC Ltd. FMCG
Larsen & Toubro Ltd. Engineering
Mahindra & Mahindra Ltd. Automobiles - 4 wheelers
Maruti Udyog Ltd. Automobiles - 4 wheelers
NTPC Ltd. Power
Oil & Natural Gas Corporation Ltd. Oil Exploration/Production
Ranbaxy Laboratories Ltd. Pharmaceuticals
Reliance Communications Limited Telecom
Reliance Energy Ltd. Power
Reliance Industries Ltd. Refineries
Satyam Computer Services Ltd. Computers - Software
State Bank of India Banks
Tata Consultancy Services Ltd. Computers - Software
Tata Motors Ltd. Automobiles - 4 Wheelers
Wipro Ltd. Computers - Software

Types of Banking

There are 5 classifications in banking sector. These classifications are based on their activities.

 

1.      Retail Banking

2.      Commercial Banking

3.      Private banking

4.      Saving Banking

5.      Community Development Banking

Let us see these one by one with perfect examples.

Retail Banking:

·        Retail banking refers to banking activities and services for customers directly.

·        Services includes savings, transactional accounts, personal loans, credit and debit cards.

·        For Example Indian Bank, SBI, Indian Overseas bank, Dena Bank, and Many others in India.

Commercial Banking:

• Commercial bank is the term used for a normal bank to distinguish it from an investment bank.
• Commercial bank can also refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public (retail banking). It is the most successful department of banking.
• For Example, IDBI, ICICI, NABARD, HDFC, and many other.

Private Banking;

• Private Banks are nothing but its owned by high net worth individuals. Private Banks may provide financial services for other individuals also.

Saving Banking:

• Saving Bank accepts deposits of customers.

Community Development Banking

• These Banks are regulated banks that provide financial services and credit to underserved markets or populations or specific kind of community people.
• For Example, ISLAM BANK in Kerala. 

Understanding about Treasury Bills

Treasury Bills
 Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value. The return to the investor is the difference between the maturity value and issue price.


Types Of Treasury Bills 
  
   There are different types of Treasury bills based on the maturity period and utility of the issuance like, ad-hoc Treasury bills, 3 months, 6 months and 12months Treasury bills etc. In India, at present, the Treasury Bills are issued for the following tenors 91-days, 182-days and 364-days Treasury bills.

Benefits Of Investment In Treasury Bills

	No tax deducted at source
	Zero default risk being sovereign paper
	Highly liquid money market instrument
	Better returns especially in the short term
	Transparency
	Simplified settlement
	High degree of tradeability and active secondary market facilitates meeting unplanned fund requirements.

Features

   Form

The treasury bills are issued in the form of promissory note in physical form or by credit to Subsidiary General Ledger (SGL) account or Gilt account in dematerialised form.

Minimum Amount Of Bids Bids for treasury bills are to be made for a minimum amount of Rs 25000/- only and in multiples thereof.

   Eligibility:

All entities registered in India like banks, financial institutions, Primary Dealers, firms, companies, corporate bodies, partnership firms, institutions, mutual funds, Foreign Institutional Investors, State Governments, Provident Funds, trusts, research organisations, Nepal Rashtra bank and even individuals are eligible to bid and purchase Treasury bills.

   Repayment

The treasury bills are repaid at par on the expiry of their tenor at the office of the Reserve Bank of India, Mumbai.

   Availability

All the treasury Bills are highly liquid instruments available both in the primary and secondary market.

   Day Count

For treasury bills the day count is taken as 365 days for a year.

   Yield Calculation

The yield of a Treasury Bill is calculated as per the following formula:

	(100-P)*365*100
Y =	------------------
	P*D

Wherein	Y = discounted yield
	P= Price
	D= Days to maturity

   Example

A cooperative bank wishes to buy 91 Days Treasury Bill Maturing on Dec. 6, 2002 on Oct. 12, 2002. The rate quoted by seller is Rs. 99.1489 per Rs. 100 face values. The YTM can be calculated as following:

The days to maturity of Treasury bill are 55 (October – 20 days, November – 30 days and December – 5 days)

YTM = (100-99.1489) x 365 x 100/(99.1489*55) = 5.70%

Similarly if the YTM is quoted by the seller price can be calculated by inputting the price in above formula.

Primary Market

n the primary market, treasury bills are issued by auction technique.

CALENDAR OF AUCTION FOR TREASURY BILLS

Treasury Bill	Day of auction	Day of payment
91 day	Every Wednesday	Following Friday
182 day	Wednesday preceding thenon-Reporting Friday	Following Friday
364 day	Wednesday preceding the reporting Friday	Following Friday

   Salient Features Of The Auction Technique

	The auction of treasury bills is done only at Reserve Bank of India, Mumbai.
	Bids are submitted in terms of price per Rs 100. For example, a bid for 91-day Treasury bill auction could be for Rs 97.50.
	Auction committee of Reserve Bank of India decides the cut-off price and results are announced on the same day.
	Bids above the cut-off price receive full allotment; bids at cut-off price may receive full or partial allotment and bids below the cut-off price are rejected.

   Types Of Auctions

There are two types of auction for treasury bills:

	Multiple Price Based or French Auction: Under this method, all bids equal to or above the cut-off price are accepted. However, the bidder has to obtain the treasury bills at the price quoted by him.
	Uniform Price Based or Dutch auction: Under this system, all the bids equal to or above the cut-off price are accepted at the cut- off level. However, unlike the Multiple Price based method, the bidder obtains the treasury bills at the cut-off price and not the price quoted by him.

S&P CNX Nifty & S&P CNX Defty

S&P CNX Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios,index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.

• The total traded value for the last six months of all Nifty stocks is approximately 44% of the traded value of all stocks on the NSE
• Nifty stocks represent about 63% of the Free Float Market Capitalization as on Dec 31, 2010.
• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06%.
• S&P CNX Nifty is professionally maintained and is ideal for derivatives trading

S&P CNX Defty

Almost every institutional investor and off-shore fund enterprise with an equity exposure in India would like to have an instrument for measuring returns on their equity investment in dollar terms. To facilitate this, a new index the S&P CNX Defty-Dollar Denominated S&P CNX Nifty has been developed. S&P CNX Defty is S&P CNX Nifty, measured in dollars.

Salient Features

• Performance indicator to foreign institutional investors, off-shore funds, etc.
• Provides an effective tool for hedging Indian equity exposure.
• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 Lakhs is 0.06%
• Provides fund managers an instrument for measuring returns on their equity investment in dollar terms.

Calculation of S&P CNX Defty

Computations are done using the S&P CNX Nifty index calculated on the NEAT trading system of NSE and INR-USD exchange rate that is based on the real time polled data feed.

S&P CNX Defty = S&P CNX Nifty at time t * Exchange rate as on base date
                     Exchange rate at time t

Calculation of closing value of S&P CNX Defty

Closing value of S&P CNX Defty is computed by considering average of INR-USD polled data values (exchange rate) of last 30 minutes of the market.

Closing value of    =  Closing value of S&P CNX Nifty * Exchange rate as on base date
S&P CNX Defty       Average of exchange rate of last 30 minutes of the market


Specifications of S&P CNX Defty:

Base date: 03 November 1995
Base S&P CNX Defty Index Value: 1000 
S&P CNX Nifty Value as on Base date: 1000 
Exchange rate as on base date: 34.65 
Adjustment factor as on Base date:1.00 

Budget Highlights

Positive from Budget 2011 – 2012

· Senior Citizen Age Limit reduced from 65 years to 60 years for Income Tax purposes

· The green orientation of the budget is a welcome positive

· Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent

· Direct investment in Indian Mutual Funds by any foreigner is a big move

· MFs allowed to raise money from foreign investors is pathbreaking

· Budget is positive for equity markets

· Lower fiscal deficit target is commendable

· No import duty on ship parts positive for SCI

· Tax exemption limit for senior citizens raised to Rs 2.5 lakh from 2.4 lakh

· Basic food and fuel and precious stones, gold and silver jewellery to be exempted from central excise duty

· Nominal 1 per cent central excise duty on 130 items entering the tax net

· LED to cost less

· Government has cut many import duties to check inflation

· No further rollback of 2008 stimulus

· Direct cash subsidy for poor on fuel, fertilizers by March, 2012

· Category for ‘very senior citizen’ positive for rich

· Steel prices to come down

· ICICI Direct: Unchanged excise is positive for auto, OEMs

· FY 11 revenue deficit at 2.1%, sentiment positive says Nirmal Jain

· Tax exemption limit for individuals increased from Rs 1.6 lakh to Rs 1.8 lakh

· Exemption limit for women remains the same at Rs 2,40,000.

· For senior citizens above 80, the tax exemption limit has been raised to Rs 500,000 (Super senior citizens)

· For senior citizens, tax exemption limit increased to Rs 2,50,000 (Age 60+)

· Priority home loan limit upped from Rs. 20 lakh to Rs. 25lakh

Negatives of the Budget 2011 – 12

· Health Check-Ups in Private hospitals to become expensive

· EXPENSIVE: International Air Travel

· EXPENSIVE: Domestic Air Travel

· Tax on life insurance service providers could be negative for insurance companies

· Travel, Healthcare to become expensive due to increased service tax

· Lack of FDI in retail was a disappointment

· New service tax to hurt companies in hospitality

· Hike in export duty on Iron Ore is a negative

· Air travel to cost more

· Branded clothes may cost more

· Rise in MAT to hurt RIL, GVK Power, telcos

· FY 11 fiscal deficit above estimates, negative

· Divestment but no privatization is timid

· Doubled anganwaadi wages with a check on absenteeism not good

Source: Fwd Email

Railway Budget Highlights

Railway Budget 2011-12: The highlights

• Got 85 proposals for PPP
• High demand for coach, wagons can’t be met immediately
• To set-up single window for PPP approval
• To set-up rail-based industries for passenger coaches
• Giving economic share to industrials to invest in rail
• Some rolling stock materials not available
• Have to depend on imports for rolling stock material
• To set up coach factory in Palaghat
• To set up metro coach factory in Singur
• To set-up diesel locomotive centre in Manipur
• Imphal to be connected with rail network soon
• To set up new coach factory at Kolar via PPP or JV
• To set up two more wagon units under JV mode
• To set up two more wagon units in Kerala
• To set up rail industrial park at new Bongaigaon, Nandigram
• To set up 700 MW gas-based power plant in Maharashtra
• Planning 1320 MW thermal power plant in Agra
• To set up 1300 MW thermal power plant in AP
• Aiming 700 km of annual rail line addition as compared to the current 150 kms
• Working on 1000 MW captive power plant in Bihar
• To build new rail line capacity of 700km versus 180km a year
• To raise Rs 10,000 crore via tax free bonds
• Annual plan for FY12 at Rs 57,630 crore
• Annual gross budgetary support at Rs 20,000 crore
• Market borrowing at Rs 20,594 crore
• Rs 13,824 crore for acquisition of rolling stock
• Doubling spend on gauge conversion to Rs 2,470 crore
• To spend Rs 9,583 crore for new line in FY12
• To create fund to implement socially desirable plans
• Railways earnings likely to exceed Rs 1 lakh crore
• Three railway zones to implement anti-collision devices
• To construct 172 rail over bridges in FY12
• To do away with all unmanned rail crossings in FY12
• Started e-procurement system to ensure transparency
• Saved Rs 300 crore on rail re-alignment
• To give 12,000 acre for dedicated freight corridor
• 442 station up-gradation to be completed by March
• To cut booking charge on AC to Rs 10 versus Rs 20
• Freight loading aim at 993 million tonne in FY12
• Wagon procurement target at 18,000 units in FY12
• To launch nine new Duranto, three Shatabdi trains
• To introduce 56 new express trains
• Frequency of 17 trains to be increased
• To fill up 13,000 RPF jobs
• FY12 operating ratio pegged at 91.1%
• Lost Rs 2,000 crore in FY11 on iron ore export curbs
• Disruption cost Rs 1,500 crore loss in FY11
• Railways saved Rs 3,700 crore due to austerity steps
• Operating ratio excluding pay panel arrears at 84% now
• Double-stack container train from Gujarat to Gurgaon
• Railway earnings set to top Rs 1 lakh crore mark in FY12
• Expect railways financial health to revive in FY12
• To see Rs 5,260 crore savings in FY12
• See Rs 5,258 crore excess funds with railways in FY12
• Freight target reduced by 20 million tonne to 924 million tonne
• To complete 1,075 km new rail lines in FY12
• Aim to complete dedicated freight corridor by December 2016
• Concession for women senior citizen cut to 58 years versus 60 years
• To double-line 867 km of rail tracks in FY12
• To up capacity of 107 Mumbai local trains.

Source: Fwd Mail